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Excerpt on PLS from Stock. Head in the Australian today
(apologies if previously linked)
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https://www.theaustralian.com.au/bu...x/news-story/d258b9c53272881509d514ccb0a38dd3
MoneyTalks: Why this portfolio manager is bullish on the most shorted lithium stock on the ASX


Mark Williams is on a Pilbara Minerals bull ride. Picture: Getty Images

• By JESSICA CUMMINS
• STOCK HEAD
• 1:19PM FEBRUARY 2, 2024

MoneyTalks is *’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.
Today we hear from Australian Ethical portfolio manager Mark Williams.
Williams, who covers telecommunications as well as several other sectors across industrials, such as lithium, believes it’s going to be another year of uncertainty on the markets.
But he says that with the US Federal Reserve indicating the pathway downwards for interest rates towards the end of 2023, growth sectors such as healthcare and technology should see some positivity.

“It will be interesting to see if that plays out or not and if it does, there’s potential for growth sectors of the market – which have seen challenging times in the last year or two – to outperform again,” he said.
“On the resources front, lithium is an interesting one – in the short term, the spot price very much dictates sentiment but we’re pretty confident about the long-term demand thematic around the lithium batteries needed to power growth in EVs and general energy storage.”.

Top ASX picks

PILBARA MINERALS (ASX: PLS )
Yep, the ASX’s most-shorted stock.
Williams approaches the lithium market and opportunities in the sector by focusing on companies that are in production.
“It’s an important aspect to consider if you think about the type of cycle markets are in at the moment,” he says.
“Pilbara Minerals have been in production for a couple of years, and they’ve generated significant free cash flow, which means their balance sheet is strong, as opposed to those still in development phases that are finding funding more challenging.
“When you’ve got lithium markets and spot prices falling dramatically, those that are either not quite in production or just getting to that point find themselves in a difficult situation,” he says.

“This is exactly what we saw in the last downturn in 2019 heading into early 2020 – just having a strong balance sheet enabled them to get through the tough times and acquire the Altura business next door to them, which is now helping them build scale into the business,” he said.
“A strong balance sheet is key, and they’ve certainly got one of the strongest balance sheets in the market – their latest quarterly should remind people of those types of attributes.
“I think they’ve been prudent to talk about the dividend, but it looks like they’ll probably withhold the dividends for the first half just to preserve cash to make sure their balance sheet is strong, which I think is a very sensible thing to be doing in this type of market.


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