Growth Focus: Independence Group NL (IGO)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
Some opportunities are worth waiting for and we have been doing just that with Independence Group NL (IGO), though now might be the time to take a closer look at the integrated miner as it breaks through major technical resistance, backed by strong fundamental performance and forecasting.
Founded in 2000 and headquartered in Perth, IGO is a miner and producer operating in WA, NT and Victoria with assets spread across nickel, gold, silver, copper, zinc and lithium. The company combines steady organic growth with a reasonably active acquisition strategy that has built a well-diversified exposure to a commodity basket that is performing well and has strong growth expectations going forward to 2020.
After sales and earnings decreased in 2016 the company has seen fundamentals steadily increase throughout the last year, with earnings lifting by 9% in 2017 alone. Analysts expect a return to strong growth in 2018 with sales set to double and earnings forecast to jump by around 160%, with further strong growth set to continue into 2019. This mirrors rising consensus target prices as set by analysts, which even though current pricing is running at a 10% premium, these aggregate valuations have risen by more than 15% in the last three months alone.
While IGO is a large company, with a market cap over $3B, it has had a volatile pricing history defined by large and long-running price trends. The share price has wound its way through three major price cycles over the last 15 years and has seen booms of more than 500% and 600% followed by busts greater than 70% and 80%, but when in trend it tends to stay in trend for years. Above even this dynamic is the current fascinating situation where the whole of the history just described is contained underneath one 11 year linear resistance line… which broke in January 2018.
We have seen price move up through that linear resistance line and work against structural resistance around $5 which broke this month and has successfully converted that old resistance into new support this week. We see good positive momentum across short, medium and long-term timeframes with good support directly underneath and attractive resistance targets stretching far above current pricing.
There is an added point of interest in that there is a significant short interest of over 10% (of market cap) which could provide some extra impetus to an already attractive prospect with high potential for further gains. While volatility should be expected to continue, the technical and fundamental picture is very attractive and IGO looks like it is indeed ready to go.