Stocks to watch after the COP26 climate summit


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There has been a lot of talk about climate change with the recent climate summit and it has been suggested that part of the way forward is to phase out internal combustion engines because electric vehicles (EVs) are supposedly the way of the future.

Indeed, over the past decade, there have been huge advancements in battery technology with lithium-ion batteries the choice for EV production.

The demand for electric vehicles and the batteries that power them has sent lithium and lithium stocks soaring with the demand for EVs expected to rise dramatically over the next decade. Another mineral that is less talked about but just as essential to lithium-ion battery production is graphite.

market wrap cop26

This mineral is currently in phones, cameras, laptops to name a few, as it is the anode material in the lithium-ion battery that contains graphite.

One Australian company set to take advantage of the growth in EVs is Evolution Energy Minerals (ASX: EV1) that listed on the ASX after a successful $22 million dollar capital raising.

Investors purchased the stock in EV1 at $0.20 and after listing on November 16, it traded at $0.58 before rising to $0.70 or a 250% gain for those who invested in the IPO. However, by Thursday it had traded down to close at $0.52 or a 25% drop in price, which is not surprising, given it was an IPO.

It is not unusual to see a lot of excitement with IPOs where investors attempt to stag a profit by purchasing the stock with the intent of selling it for a large profit in the first few days of listing. As such, now is not the time to get into this stock, as there is a high probability it will continue to fall away at least in the short term. That said, I suggest you keep watching this stock and the graphite and lithium space for opportunities.

The best and worst performing sectors this week

The best performing sectors include Information Technology up more than 3% followed by Healthcare up more than 2% and Communication Services up more than 1%. The worst performing sectors include Financials down more than 3% followed by Materials and Energy, which are both down more than 2%.

The best performers in the S&P/ASX top 100 stocks include NextDC and Wisetech Global, as both are up more than 7% followed by Virgin Money, Incitec Pivot and Evolution Mining, which are all up more than 5%. The worst performing stocks include CBA down more than 9% followed by James Hardy Industries, Bank of Queensland, BHP and Worley, which are all down more than 4%.

What's next for the Australian share market

As I have mentioned previously, both the Financial and Materials sector determine the direction of our market and this week both have traded down, as has the Energy sector. Given this, despite seven other sectors rising, the All Ordinaries Index is slightly in the red for the week. As such, even though our market rose on Monday to its highest level since September 8, it is struggling to rise up out of the sideways pattern it has been in over the past month.

While I believed our market would rise until January or February, I am starting to think the opposite might occur. Right now, I would not be surprised to see the All Ordinaries Index fall away around less than 5% over one or two weeks before rising up into February, although if the fall is larger in price and lasts longer than two weeks, we may need to be prepared for a longer, steeper fall in the New Year.

One thing I am sure of is that any move down will be good for the market, as it will set it up for a good year in 2022.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.