will o&g services be the next boom sector?

There's been a lot of talk about whether NMS is just taking off or getting pricey so i thought it was worth putting it out there to discuss - can't the two coexist, i.e. high p/e and increasing momentum.

While it’s true that Neptune has run quite nicely over the last few months, it’s worth keeping things in perspective.

We’re still well off our all-time high and yet quarterly after quarterly, we have been given nothing but excellent results. Additionally, the economic climate is improving almost weekly and if we can avoid a W-shaped recovery, then more and more funds will come off the sidelines and into the market.

It seems to me that things have really only just begun for Neptune. Why?

Firstly, it’s ok for us to keep up with the latest contracts and industry movements that are going to influence our investments. However the average investor does not do that. They rely on brokers, friends and pop media to propel them into action.

Once Gorgon and W.A. shelf activity filters down the line, it seems reasonably likely that we could have the next flavour of the month and a type of mini boom within the sector. I think we are in the early stages of this now, as fund manager and private investor wealth begins to enter the sector.

Looking back:

Recall, first, the rush to uranium stocks back a few years ago. This was almost madness, with explorers, several years off production, rising several hundred percent in less than a few months.

Iron ore was next and we can all probably name at least one stock we held that bought home the bacon.

More recently, the CSG market entered a boom period and a similar fate was enjoyed by these stocks as per U and IO.

You could also throw in smaller booms, such as Molybdenum and clean energy stocks and several other industrial metals and also precious metals.

The point is, funds must have somewhere to flow and rotation is one of the easiest ways for this to happen and for investment banks to make a lot of money.

The key with booms is that sentiment becomes such that forward earnings are anticipated to be so much higher (everyone’s talking about getting a slice of the Gorgon juggernaut) that a higher p/e is apparently justified.

I feel that stocks like NMS, MRM, WOR, CLO will all experience this in the coming months or if not, then within a 12-month timeframe once information is well and truly absorbed.

The point here is that the fate of many smaller metal explorers is pinned to global demand and thus commodity prices. Companies like Neptune, who actually provide a service, not entirely reliant on a thriving economy, are well insulated from these factors. Gorgon is icing on an already sweet cake.

Getting back to the original argument, I fully expect Neptune to become overpriced relative to earnings in the next few months. This will be an opportunity to take some cream off the top of your investment but I guess that is not everyone’s strategy.

I’m happy to share my strategy of owning 200,000 NMS and anticipating a $5 share price at some point within the next 3 years, perhaps. I don’t depend on this happening and if it takes 5 years then that is fine. But everyone should have an investment plan and that is my path to what I see as a carefully chosen investment, in the right sector at the right time, with the expectation of big things to come.