29. December 2020 | 10:29 CET
Alibaba, Osino Resources, Barrick Gold: Fantasy + Stability = Returns
The past few years have had a notable impact on investors: Tech companies, in particular, have been well received on the markets, while classic sectors were spurned despite low valuations. But for some months now, the big turnaround has been underway: more and more classic sectors that can score with low valuations are catching up - tech stocks are holding up solidly, but are increasingly facing headwinds. That's what happened with Alibaba. Like its big role model, the Chinese Amazon clone has long been more than just a retailer. Through its Ant Group holding, Alibaba is thick in the fintech business: payment, banking, insurance - all of this, fed by valuable data, promises a thriving business in the future. That is if it were not for the Chinese regulators.
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ISIN: CA68828L1004 , US01609W1027 , CA0679011084
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Alibaba: Power struggle with Beijing only knows losers
After the holidays, Alibaba's stock plunged double digits after China's central bank ordered fintech giant Ant Group to "clean up" its business and return to core operations as soon as possible. This "recommendation for action" contradicts Alibaba and Ant Group's original strategy.
As recently as November, the retail giant wanted to take its fintech subsidiary public. But the largest IPO of all time was called off due to pressure from Beijing. Now comes the next blow for the omnipotence fantasies of the Chinese tech giants. Chinese authorities accuse the companies of having an unfair market position to the detriment of consumers.
After the new price slide, Alibaba shares are only up about 8% on a one-year horizon. As recently as mid-October, the share price balance looked much friendlier. For years, Alibaba was marketed as a no-brainer and was considered as stable as Amazon, with a good pinch of Asian fantasy. But recent months have shown that the Company's headquarters in China can also become a burden. Investors should ideally follow the feud between China and Alibaba passively and without shares in the portfolio. It cannot be ruled out that the conflict will reach other companies from China.
Osino Resources: 2021 as the hot phase until production
Free from the pressure of omnipotent governments, the Canadian gold Company Osino Resources operates in Namibia. Canada offers good framework conditions for commodity companies as a corporate domicile, and Namibia also stands for legal security and mine-friendly policies.
The democracy in southern Africa, which has existed for decades, generates around 8% of its economic output from the mining industry. Neither is this a negligible factor, nor is it an indication that Namibia's economy is based solely on raw materials extraction. The latter is often the case in autocratic systems in Africa and a warning sign of social inequality and exploitation. Osino Resources is free of these risks with its Twin Hills project.
The Company is currently advancing the gold property with several drill rigs, and as recently as November released results suggesting a larger gold deposit size. An additional 60,000 meters are expected to be drilled in 2021, and an updated resource estimate will be released in early 2021. Feasibility studies, financing details and permitting processes for a mine are then expected to follow from late 2021. The stock has gained around 85% on a one-year view but has recently consolidated a little. With drilling programs underway and events expected by the end of 2021, the project is in a hot phase: investors can add the stock to their watchlist.
Barrick Gold: Slow and steady to success
On the other hand, Barrick Gold currently offers considerably less fantasy: The world's largest gold producer is making steady profits and is swimming in money, but the market is wondering where the Company is headed. Acquisitions are unlikely given the pandemic. But companies like Barrick are forced to expand their portfolio and replace mined gold. Favourable terms and safe political locations are essential in this regard. Now that the industry seems to have moved away from South America a bit, mining locations in Australia or Africa could come back into the big players' focus - Namibia, in particular, is considered a good location.
However, shareholders of Barrick Gold should rely less on exorbitant price jumps and more on steady development. The stock is predestined for this. In the long term, it will be whether Barrick makes the right decisions and smart strategic acquisitions.