July 4th, 2022 | 12:25 CEST
Attention, turnaround! Lufthansa, TUI, Desert Gold, Deutsche Bank: These stocks are taking off again!
From several perspectives, the ongoing crisis is a mammoth task for asset managers and private investors. First, after the long uptrend and the absolute boom valuation of growth stocks from 2015 to 2022, no one knows when a sufficiently high discount has been reached to re-enter. Some stocks, such as Plug Power, are very forward-looking and dependent on government contracts. Here there have already been sales valuations of a factor of 200. So is a P/S ratio of currently 12 after an almost 80% share price loss cheap or still hopelessly overpriced? We do not know because the ongoing war sets new market parameters daily. The major indices will therefore continue to search for a valuation basis in a very volatile manner. We pick out a few selected opportunities.
time to read: 5 minutes
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Author:
André Will-Laudien
ISIN:
LUFTHANSA AG VNA O.N. | DE0008232125 , TUI AG NA O.N. | DE000TUAG000 , DESERT GOLD VENTURES | CA25039N4084 , DEUTSCHE BANK AG NA O.N. | DE0005140008
Table of contents:
"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
Author
André Will-Laudien
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
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Gold below USD 1,800 - Desert Gold Ventures is on the move
There was a bit of a shock on Friday! Gold briefly fell below USD 1,800 and marked a new six-month low of USD 1,784. Likewise, silver plunged below USD 20 for the first time since the summer of 2020. Contrary to what many investors had expected since the beginning of the war, the precious metals corrected partly erratically in a still strongly downward overall market.
But now is the time to look at gold stocks that still have their gold reserves hidden in the ground. If the price of the mined ounce is already falling, projects for the future will also be valued lower, offering perfect entry scenarios for promising properties. The Canadian explorer Desert Gold Ventures (DAU) still has a short way to go in developing its African assets, but the milestones reached are promising.
At the end of June, there were again new drill results from 91 drill holes at the top SMSZ property in Mali, West Africa. All reverse circulation (RC) drill holes intersected significant amounts of gold mineralization (0.41 to 1.91 g/t AU), with the top value of 1.91 grams per tonne of gold spanning as much as 32 meters. A detailed review of the metallurgy and mineability of the gold oxide resource, starting with the higher grade Barani East deposit, is underway. Once assay results are available and evaluated for the Mogoyafara South and Linnguekoto West zones, a follow-up program will be designed.
CEO Jared Scharf commented: "Our recent drilling continued to return numerous wide intercepts of gold mineralization along a 1.6 kilometer zone, with up to five lenses of gold mineralization encountered within a 130 meter wide corridor. This recently defined gold system, which is not part of our current resource, demonstrates the tremendous gold occurrence in the region and the potential for resource expansion and additional discoveries at the SMSZ project."
A total of 20,000 meters of drilling is expected to be completed in 2022. Based on the current results, the next resource estimate will likely be raised. The stock ended June at about CAD 0.10 and a total valuation of CAD 16 million, equivalent to just under EUR 12 million. The share is currently trading liquid again, and the positive newsflow should continue to support the price, even if the precious metals do not want to come up in price at the moment. Position yourself now!
TUI and Lufthansa - This summer will be the acid test
Away from precious metals, the situation in the tourism business is getting out of control. Overloaded airports, hours of additional waiting time, overbookings and cancellations, sometimes even shortly before departure, are driving holiday-makers into madness. The travel and aviation companies can hardly manage their regular business today without the personnel recently released in the pandemic. However, many families in Germany have not been able to take a vacation for the last two years and feel an urgent need to catch up.
The travel offers on the Internet are luxuriant and plentiful, but providers are not currently able to get into a proper performance fulfillment mode. Also complicating matters is the dramatic understaffing of airports, pilot services and the availability of entire aircraft crews. It is disconcerting when clusters form in front of check-in desks, and the overhead announcer announces, "We cannot start boarding until the crew arrives!" - sometimes, they just don't arrive on time, and so the airport cancels the scheduled slot. What a mess!
This is not good news for service providers TUI and Lufthansa, and the chaos on the Internet speaks volumes. Many investors reacted with a huff and sold the highly indebted companies for the time being, and the share prices went from one year's low to the next. At the end of June, TUI once again reached its 2020 Corona low of EUR 1.52, while the LHA share price of EUR 5.65 is only just above its low of EUR 5.27. TUI still announced late in the afternoon on Friday that it had repaid EUR 725 million in silent participation to the German Economic Stabilization Fund (WSF). Lufthansa had already repaid a billion euros in the first quarter. TUI reduced its KfW debt from EUR 2.4 billion to EUR 2.1 billion. The management had recently changed, but the stock market is still writing all-time lows on the blackboard. Nevertheless, the summer business seems to be going well, even though some compensation payments will likely be due. An entry is currently very speculative and needs strong nerves in this environment, but perhaps it will happen at the right time.
Deutsche Bank - Fully under the wheels
The Deutsche Bank (DBK) share has had a horror semester on the stock market. The value fell from EUR 14.64 in February to EUR 7.94 at the beginning of July. Such a halving of a DAX value only occurs in the case of operationally poor figures or persistent profit warnings, but neither is currently the case.
The head of Germany's largest private bank has repeatedly pointed out the threat of recession in Europe. The bank is probably in the process of adjusting to this economic scenario. Impending bankruptcies and a slump in new business would be the result of an economic crisis, which Christian Sewing seems to be forecasting. In his opinion, inflation is the biggest poison for the economy and society and should be fought accordingly. "I would say that inflation worries me the most, and that is why I believe that the signal we have received from the central banks, whether from the Fed or now also from the ECB, is the right signal," the CEO told Frankfurter Allgemeine Sonntagszeitung. Sewing already said in December that he does not consider inflation a temporary phenomenon but a multi-stage development. The central banks are challenged to ensure this development does not get out of hand.
Deutsche Bank has significantly reduced its presence and exposure in Russia since 2014 and has further reduced it in recent weeks. Gross loan exposure is now only EUR 1.4 billion, or just 1% of the total loan book. Why the share has a strongly negative development compared to the DAX is not derivable for us at the moment. Perhaps prices around EUR 8 are also attractive entry prices for risk-conscious investors. Nevertheless, set tight stops!
The shocks on the stock market continue, but they also deliver buying opportunities again and again. While the markets were consistently highly-priced in 2021, some stocks currently offer a fair risk-reward profile again. Desert Gold delivers milestone above milestone and is favorably valued. TUI, Lufthansa and Deutsche Bank offer buying opportunities at least at multi-year lows in the chart.
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