I've previously written about my expectations for the Australian share market in 2019 as macroeconomic trends and structural headwinds look set to combine for a perfect storm of volatility in the short- to medium-term.
Having chosen Wesfarmers Ltd (ASX: WES) as the cornerstone stability stock for my portfolio, my second of three picks for my "2019-proof" portfolio is a growth stock from the Metals and Mining sector to capitalise on short-term tailwinds for global resources.
Syrah Resources: The Growth Stock
I've picked Syrah Resources Ltd (ASX: SYR) as my top growth stock as I think Friday's closing price of $1.955 per share, whilst up 29.97% for the year, is a bargain for what the company has to offer. The Syrah share price reached as high as $6.097 back in June 2016 but saw a whopping 67.55% decline in 2018 as production issues in Mozambique combined with global trade headwinds to increase costs and reduce profitability for the company.
Whilst Fools might be wondering why I'd choose a stock in the notoriously cyclical resources sector for my growth prospect in 2019, in my view, the short-term outlook for graphite producers such as Syrah appears better than most. Graphite globally is seeing tightening supply at the same time as Syrah is ramping up commercial production at its Balama mine – the largest of its kind in the world – which is supporting pricing at the same time as demand looks set to explode.
Syrah has a huge opportunity to put its operational issues behind it and dominate the global spherical graphite market in 2019. I would anticipate a significant increase for global graphite coming from a greater domestic and global focus on renewable energy storage (i.e. lithium-ion batteries) and increasing electric car production including the Tesla Model 3.
With Wesfarmers as my stability pick to ground the portfolio in Consumer Staples and pick up an attractive yield, an allocation to Syrah Resources provides capital growth potential for the portfolio. This should help bolster portfolio returns and make the most of short-term tailwinds for the graphite market, leaving just my final defensive stock allocation in the form of AGL Energy Limited (ASX: AGL).
