07. September 2021 | 12:45 CET
Alibaba, Barsele Minerals, K+S: Where comeback opportunities now lurk
Stocks that have taken a bit of a beating have a certain appeal for investors. On the one hand, the shares seem to be on special offer, and on the other hand, it quickly becomes clear from the performance chart where the potential of the respective Company on the stock market extends. But shares are not always ripe for a comeback. What investors should watch out for and what the situation looks like for three selected stocks.
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ISIN: ALIBABA GR.HLDG SP.ADR 8 | US01609W1027 , BARSELE MINERALS | CA0688921083 , K+S AG NA O.N. | DE000KSAG888
Alibaba: Socialist capitalism will prevail
Alibaba's stock has lost close to 40% of its value over the course of a year. Asia's Amazon has pretty much gone under the bus on the stock market. At first, it was "only" the burst IPO of Alibaba's subsidiary Ant Group, and then it turned into a multi-layered complex of problems. The central government in Beijing has been worried about economic stability for years. The years of upswing also brought one or two excesses. Such excesses cannot be reconciled with the socialist worldview. After Alibaba founder Jack Ma indirectly criticized Beijing, the muscle games began. Even after the Ant IPO, China is not calming down.
Stricter requirements for foreign investors and even more regulation for education providers, which are booming in China, unsettle the market and weigh on Alibaba. However, the share price has been on the rise again for a few weeks. It looks as if the stock might be able to break free, after all. Although the uncertainty surrounding China remains, investors should not get too worried. Alibaba is broadly positioned and does not operate in any critical industry with its primary business. There is much to suggest that the resentment of party higher-ups will subside, and there will be a continuation of socialist capitalism made in China. In all likelihood, Alibaba will get back on track in the long run.
Barsele Minerals: Will this setback become an opportunity?
Barsele Minerals' stock has also had a roller coaster ride. The Company, which stands for the gold project of the same name in Sweden, announced a few months ago that it wanted to take over the project entirely from the previous joint venture partner Agnico Eagle. With the terms of the purchase already set and Barsele free to continue exploration at its leisure, the agreement was considered a good deal for Barsele, not least because of the high quality of the project. However, at the beginning of September, both parties to the agreement announced that the deadline for the purchase of the project would be extended to the end of October. In the run-up to the latest announcement, the share price crumbled, leaving Barsele shareholders with a loss of around 13% over a three-month period. What could happen now?
Immediately after the announcement of the extension of the deadline, the share price of Barsele increased significantly. The project is considered promising due to high gold grades, an option to mine industrial metals, intact infrastructure and continued exploration at the expense of Agnico Eagle. CEO Gary Cope sees the Barsele project as an opportunity for many resource companies. "The Barsele project is an opportunity for many mining companies that will not come around again anytime soon," Cope said in a July interview. The stock's recent decline appears to have ended - the value is rising again. In a historical context, and given the recently renewed intention to bring the proposed transaction to a successful conclusion, investors should watch the value closely. Above all, the legally secure location in Sweden, which offers low energy costs, could be an argument for investors.
K+S: Will the takeover follow the slump?
K+S is an excellent example of where comeback shares can go if the market environment is right. The fertilizer group is still suffering from a weak balance sheet but has managed to break free since the sale of its US business. After a slump from EUR 13 to EUR 11, the share is again making dynamic gains. Above all, rising inflation rates make K+S a suitable inflation investment for many investors. In addition, there have recently been takeover rumors surrounding K+S - after all, commodity giants such as BHP Group want to invest billions in new potash projects.
The examples of Alibaba and Barsele Minerals show it - as soon as the market gets nervous during the summer slump, prices can temporarily tumble. For long-term investors, however, such events can be an opportunity. When quality and the spirit of the times come together, impressive comebacks are within reach.