Time to get greedy with IQE plc and Hurricane Energy plc?

Paul Summers remains optimistic on IQE plc (LON:IQE) and Hurricane Energy plc (LON:HUR).

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As investors, we’re always told to buy the dips. So given that the share prices of semiconductor wafer manufacturer IQE (LSE: IQE) and oil explorer Hurricane Energy (LSE: HUR) are still to fully recover following periods of instability, is it time to get greedy?

iFlop?

After a 170% rise in price over the last six months as speculation grew over the Cardiff-based firm landing a significant contract with Apple, shares in IQE have lost momentum in recent weeks. Some of this is likely due to rumours that orders for the new iPhone 8 are significantly down on earlier releases. 

On its own, that wouldn’t be a problem; many people might simply be waiting for the release of the premium iPhone X. However, the situation hasn’t been helped by suggestions that Apple has already run into problems getting the latter manufactured thanks to snags surrounding its facial recognition hardware — the feature that IQE’s tech has been specifically linked with.

Having benefitted from the huge rise in the shares over the last few months, it’s not surprising if many traders jumped ship. The situation is compounded by the fact that a little over 6% of the company’s shares are currently being shorted.

Personally, a lot of recent speculation just presents as noise. True or false, I suspect that concerns over whether Apple will have sufficient numbers of the iPhone X to sell when it’s released generally on November 3 will — thanks to the scarcity effect — actually boost demand even further (and ultimately, IQE’s share price).  

It’s also worth remembering that IQE’s future is not dictated solely by the success of Apple’s new products. Such is the huge range of uses for the former’s technology (electric cars, thermal imaging, solar energy), it seems rational to ignore the current volatility and focus on the likelihood of £878m cap becoming a much larger company over the next few years.

For me, IQE was, is and will remain a long-term holding.

Bouncing back

After what has seemed like a quiet summer, Hurricane Energy is back on investors’ radars thanks to recent news on the Early Production System (EPS) for its Lancaster well. The rise in the price of oil over the last week or so hasn’t done any harm to the share price either.

This month, the Godalming-based fractured basement explorer has confirmed an agreement to lease the ‘Aoka Mizu’ FPSO (Floating Production Storage and Offloading) vessel, along with the signing of a rig contract with Transocean to commence in Q2 2018. All development and production consent for the EPS has also been received. 

Money isn’t an issue either. Fully-funded due to a placing and convertible bond offering completed earlier this year, Hurricane is now on track for first oil in H1 2019. Once up and running, the Lancaster EPS is expected to produce 17,000 barrels per day.

Of course, there’s far more to Hurricane than its Lancaster asset. Investors can also look forward to revised Competent Person’s Reports on its 100%-owned Halifax, Lincoln and Warwick wells in the near future. Should these be as positive as initial drills suggested, the recent resurgence in the company’s share price could be just the start of a significant re-rating.

While not a stock for investors craving share price stability, I remain confident that — over the long term — Hurricane will deliver the goods.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares in IQE and Hurricane Energy. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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