The year ahead could present interesting opportunities for investors, especially in natural resources and biotech, according to asset manager Chen Lin.
Here are his six top investment ideas for these sectors in 2022.
Chen's Top 3 Natural Resources Picks
A gold exploration company in Northern Finland, FireFox is one of three companies in the Golden Triangle in Northern Finland.
“FFOX is fully funded and they are drilling. If they hit one hole, one discovery, the stock would go up many-fold,” proclaimed Chen.
They already made a discovery to the south of the area, which is very significant.
“They will have many drilling targets throughout the year,” Chen explains.
Chen notes that, while the company’s current market cap is $20 million to $30 million, “One thing holding back the stock is the many in-the-money warrants expiring in the middle of 2022, which are likely to be exercised, and there could be some shares available for long-term investors to accumulate.”
Next in the line-up, Cerro de Pasco owns the highest-grade surface deposits in the world, and part of the largest super mine in the world.
“The stock had retreated last year after Glencorp reneged on the deal they signed. They were weakened by it; however, 2022 could be the breakout year as they are generating nice cash flow and there could be more deals coming in 2022,” Chen explained.
Also, in a space where ESG is important, the company has entered the green hydrogen business and will convert pyrite or mining waste to produce green hydrogen. Another positive sign is that, according to Chen, the CEO acquired five million shares, reflecting a solid commitment to the company.
Sierra is a growing, mid-tier producer of copper, zinc, silver, gold, and lead.
“They have 45% copper and 30-35% from gold and silver. Very similar to Freeport-McMoRan Inc. (FCX:NYSE), it had a terrible year,” recapped Chen.
“The stock, recently trading at $1.30, had hit almost $3 as it was heavily promoted by meme traders,” he said, referring to the distinctly recent phenomenon that sees dramatic increases in price, mostly fueled by social-media discussions on Reddit and Twitter, which are then followed by an inevitable crash due to the company’s actual performance.
When the company “missed earnings guidance due to COVID, the stock went down, forcing meme traders to sell,” Chen said. “The net asset value is worth $800 million, but the stock is now trading at around $200 million” — or as Chen calls it — “dirt cheap.”
It’s a “very simple story” for the stock to go up to $3 per share based on the balance sheet. “The company has almost no debt and pays a dividend.” Another promising sign according to Chen: “Insiders have been buying the stock.”
In addition to gold, Lin predicts a promising year for another sector.
Chen's Top 3 Picks in Biotechnology
The biotech sector suffered one of the worst years in their history in 2021.
“Their mini hedge fund went out of business, triggering heavy redemptions of the other hedge fund.” Chen said he was able to accumulate many bargains from the indiscriminate selling and believes the sector will have a very bright future in 2022.
According to him, three names stand out.
Tricida is a pharmaceutical company that is commercializing a drug to slow chronic kidney disease (CKD) progression. Two of its competitors, FGEN and RETA, had their CKD drugs rejected by the FDA this year.
“TCDA was trading at $40 ahead of the FDA decision, then crashed. It is targeting chronic kidney disease — a hot market. Many other funds are buying the stock on the open market, and it is under accumulation,” explained Chen.
“The FDA has been tough on CKD for sure, though I think the risk-reward is there. Before (eventual) FDA approval, I can sell some TCDA and take a free shot using house money,” he said.
“If they approve it in 2023, the stock could go to triple digits. The upside is huge,” confirmed Chen.
Chen credits George Haywood for pointing him to a little company with about a $60 million market cap is developing therapies for neurodegenerative diseases like Alzheimer’s.
“In an earlier trial, they showed significant improvement in severe, late-stage Alzheimer’s,” said Chen of his pick.
The early trial results are the subject of a peer-reviewed article that should be published in early 2022. “NIH is sponsoring their current placebo-controlled trial, and the readout should be out by the end of 2022. The indications show a very good chance of success.”
The company is fully funded.
He notes that Cassava Sciences Inc. (SAVA:NASDAQ) is in a similar stage and has almost $2 billion in market cap: “The huge gap in market cap suggests the stock could appreciate significantly. If there is any improvement, this will be a huge success.”
A synthetic biochemistry company, Amyris, “is the leader in the synthetic cannabis market. They will start selling CBG in large quantities.”
It has a $1.6 billion market cap.
Its competitor Ginkgo Bioworks Holdings Inc. (DNA:NYSE) has a $14 billion market cap and has lower sales.
Chen said that the #1 New York Times bestselling author and investor John Doerr is Amyris Inc.’s largest shareholder, suggesting Doerr could use his influence to commercialize the product.
“What if he uses his connections to put together some strategic deal with Google or Amazon? That would be the biggest wild card for 2022.”
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