02. June 2021 | 08:18 CET
Adler Modemärkte, Steinhoff, Carnavale Resources: Where gambling pays off and why
Anyone who has money can speculate. If you have no money, you have to speculate. That is how stock market veteran André Kostolany once put it. But only very few people know what a good speculation is. As a rule, private investors are too late when it comes to promising speculations. Only those who recognize good stocks in time and understand the investment stories behind them can score with speculative stocks in the long term. We outline how this works and what investors should look out for, using three stocks as examples.
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ISIN: DE000A1H8MU2 , NL0011375019 , AU000000CAV5
Adler Modemärkte: How long will this stock remain hip?
The Adler Modemärkte share has recently risen significantly. In just four weeks, the value climbed from EUR 0.19 to EUR 1.37 - that's more than 600%. But why did the share rise so much? Adler Modemärkte was already not in the best of shape before the pandemic. The online business was struggling, and in general, the chain was seen more as a shopping destination for older people. Then came the pandemic and the Company slid into insolvency. Under its own responsibility, Adler is planning to escape bankruptcy once again. The proceedings have been underway since January. In the meantime, the signs are pointing to an opening again - the pandemic has weakened. In addition, Adler received a loan of EUR 10 million in May, which would allow the stores to be restocked with merchandise and the business to continue. After all, Adler employs around 3,200 people.
The fact that the share price has recently risen so much gives hope but is also a warning signal. It is by no means the case that the cow is off the ice for Adler. Although the insolvency under its management offers the Company a variety of opportunities and the loan granted the chance of a fresh start, the situation remains fragile: both at Adler itself and around the pandemic situation, nothing can be ruled out in the medium term. While the relatively old customer base could be a plus for Adler, as they store less online and are more likely to be vaccinated, a new lockdown in the fall could turn the situation for the worse again. Adler's stock was a good speculation, but given the increased price, it is no longer.
Steinhoff: Anything is possible - but the opposite is too
The air is also out at Steinhoff. The furniture group from South Africa is facing lawsuits worth billions due to irregularities in its balance sheet. The Company was already on the verge of bankruptcy because of this. For months, investors have been speculating about whether the legal dispute would soon be resolved and a settlement reached. But this settlement is still a long time coming. After a dynamic development, the share is currently trapped between EUR 0.11 and EUR 0.12. Although the share price may surge again, setbacks are likely. Even after positive news, it remains to be seen how profitable the furniture business can be and whether the stock is even much more attractive without litigation.
Carnavale Resources: Gold, platinum, industrial metals for EUR 9 million
Unlike Adler Modemärkte or Steinhoff, the Australian Company Carnavale Resources is not a stumbling company. The Australians operate four promising projects in Western Australia around gold, platinum metals, nickel and copper. Thus, in addition to the trend towards gold, the Company also covers the increasing demand from companies around electromobility. The Carnavale Resources share must be considered highly speculative. However, the reason is not the Company's situation but its strategy: Carnavale takes raw material projects under option at low cost, carries out exploration work, and decides whether it is worthwhile to buy the respective project. Based on fixed purchase agreements, the Company can take its time with exploration or push ahead with the purchase, which is easy on the wallet and gives flexibility.
Carnavale Resources aims to use innovative exploration methods to obtain indications of potential drill targets at an early stage of projects. The smallest particles in soil samples can be analyzed and examined for their origin. Carnavale then uses this information to continue its work. At the Kookynie Gold Project, initial drilling has revealed high-grade grades at 2 meters over 16.25 g/t gold or 2 meters over 3.11 g/t. Further drilling is planned to investigate the structure of the rock between these high-grade areas. Carnavale is operating four projects of different orientations, looking to develop these further in 2021, and valued at only around EUR 9 million; the share can be considered a promising speculative stock.
Conclusion: Clear business model instead of a unique situation
While the principle of hope rules at Adler and Steinhoff and the companies are in an exceptional situation, exploring projects at an early stage is part of Carnavale's daily business. In addition, the share has not yet been so clearly discovered by the market. One reason for this could be the high number of shares. Australian companies typically have many shares outstanding, which leads to very low share prices. However, the bottom line is that this is only an optical phenomenon: At EUR 0.004, it is essential to strictly limit orders and give the market time until an order is executed.