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February 1st, 2024 | 07:15 CET

Bayer, Almonty Industries, Volkswagen - Three hot stocks for the portfolio

  • Mining
  • Tungsten
  • Electromobility
  • Pharma
Photo credits: pixabay.com

While all eyes are on the Fed decision on January 31, and many investors are in a waiting position, one can embark on the search for stocks with significant upside potential. We have identified three exciting stocks whose share prices are far from reaching their potential. Each company has its own story. Bayer is struggling with the Monsanto takeover and rising costs in Germany. Almonty Industries is constructing the largest tungsten mine outside China and is already in production in Europe. Volkswagen aims to transition the entire group to electromobility, which is a colossal task. Which of these three candidates has the most potential?

time to read: 5 minutes | Author: Armin Schulz
ISIN: BAYER AG NA O.N. | DE000BAY0017 , ALMONTY INDUSTRIES INC. | CA0203981034 , VOLKSWAGEN AG VZO O.N. | DE0007664039

Table of contents:


    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG

    Full interview

     

    Bayer - Awaiting the Capital Markets Day

    Former football World Champion Andy Brehme once said: "If you have crap on your foot, you have crap on your foot." This old footballer's wisdom can also be applied to Bayer. Since the Monsanto takeover, which cost the Leverkusen-based company USD 63 billion, there has been sand in the Company's gears. Bayer was hit with a wave of lawsuits due to the weedkiller glyphosate, which experts believe was foreseeable. Since then, the numerous lawsuits have hung over Bayer like the sword of Damocles. If one lawsuit is won, there is brief hope, which fades again with the next defeat and weighs on the share price.

    At the end of January, a plaintiff suffering from cancer was awarded damages of USD 2.2 billion. The verdict will be appealed, as claims are often significantly reduced in subsequent instances. Provisions have been made for the glyphosate litigation, but doubts are repeatedly raised as to whether these are sufficient. Most recently, there have also been lawsuits regarding PCBs. There are few provisions for this so far. When the study of the promising blood thinner Asundexian was discontinued, the share price plummeted. Most recently, the Company suffered another blow.

    The chemical union is demanding 6 to 7% more wages. In addition to rising energy costs, this would be another cost factor that would increase. However, negotiations are not due to start until April. This is the chance for the new CEO, Bill Anderson, to make his strategy palatable to investors at the Capital Markets Day on March 5 and to initiate the turnaround. The Bayer story is somewhat reminiscent of MorphoSys, which also hit rock bottom and then staged a brilliant comeback. The share price recently fell below the EUR 30 mark. However, the expected major sell-off below the psychologically important mark failed to materialize. The current price per share is EUR 29.76.

    Almonty Industries - Significant potential over the course of the year

    A commodity that many people only associate with light bulbs is tungsten. However, tungsten is a critical raw material, as over 90% of the world's supply comes from China and Russia. Demand for tungsten is expected to increase as it is needed in various industries, particularly in new technological sectors. The semiconductor, automotive, energy and defense industries are particularly noteworthy. The Western world must, therefore, seek alternatives if it wants to retain its independence. The US Department of Defense plans to use Artificial Intelligence to ensure the supply of critical raw materials in the future - ideal conditions for the tungsten producer Almonty. In addition to the producing Panasqueira mine in Portugal, the Company is currently building the largest tungsten mine outside China in South Korea.

    The former Sangdong mine is being managed by Almonty under the project name Almonty Korea Tungsten (AKT). Following its redevelopment, it is expected to generate an EBITDA of CAD 72 million per year. The mine can be operated for 90 years and has favourable production costs of USD 110/mtu. All permits have been granted and all required parts are already in South Korea. The project is 70% financed by KfW IPEX-Bank, and there is already a 15-year offtake agreement from the Plansee Group, which sets a minimum price of USD 235/mtu. There is no upper limit. The mining of material is scheduled to begin as early as the third quarter of this year. In addition to tungsten, there is a large molybdenum deposit on the property, offering further potential.

    The producing Panasqueira mine, which is to be expanded in the first quarter, also has more potential. The feasibility study assumes that the expansion will increase the mine life by 20 years, give access to higher-grade tungsten and almost double the production volume. Once completed, around 124,000 mtu of tungsten oxide will be produced per year. The share hardly reacted to the news for a long time, forming a sideways range between CAD 0.48 and CAD 0.62. On January 17, the share broke out to the upside. The share is currently trading at CAD 0.64. With the start of mining activities, the share price should continue to rise. Further information can be found at researchanalyst.com or at the 10th International Investment Forum on February 21.

    Almonty Industries will be presenting live at the 10th iif - International Investment Forum: Almonty Industries

    Volkswagen - Lamborghini shines

    There has recently been some tailwind for the battered automotive industry. First, General Motors presented surprisingly good figures. This was followed by a study by PwC showing that German car manufacturers have caught up in the field of electromobility. China is considered the largest market for electric vehicles, and there, German car manufacturers were able to sell 49% more electric vehicles than in the previous year. This also benefits Volkswagen, which aims to transition the entire Group to electromobility. Thomas Ulbrich, the member of the Board of Management responsible for New Mobility, was sent to China for this purpose. In future, this division will run under the Technical Development department.

    In China, Volkswagen is collaborating with XPeng and plans to offer two electric vehicles based on XPeng's platform starting in 2026. The ambitious plan extends to having 30 electric models in the Chinese market by 2030. On January 30, Bloomberg reported that the IPO of subsidiary PowerCo has been put on hold for the time being due to poor market conditions. However, postponed is not cancelled, and PowerCo, as a battery supplier and developer, could well be of interest to investors. In order to find innovations more quickly, the Group is founding the "AI Lab", which focuses on Artificial Intelligence. The lab will serve as an incubator and identify compelling ideas and collaborations that will then be pursued by various brands within the Volkswagen Group.

    Things are going well at Lamborghini, which sold more than 10,000 vehicles for the first time last year. In the luxury segment, prices play a less critical role. Nevertheless, the Group faces many challenges and wants to save several billion euros with a cost-cutting package. The main aim is to increase the margin again. At the same time, a lot of money has to be invested in the transformation, which raises the question of whether the dividend is secure. The share is currently trading at EUR 119.66, giving a dividend yield of around 7.5%.


    All three companies have the potential to see significantly higher stock prices. For Bayer, much depends on the future strategy and whether it can successfully navigate the flood of lawsuits. Perhaps the group will also be split up. Almonty Industries possesses valuable expertise in the tungsten sector and is already a producer. The expansion of the mine in Portugal, and the anticipated reopening of the Sangdong Mine by the end of the year should provide a boost. Volkswagen is broadly diversified, which is a good thing on the one hand, but on the other, it poses challenges in terms of transformation. Costs have to be cut in order to improve the margin. However, much of the negative news may already be priced in.


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
    For this reason, there is also a concrete conflict of interest.
    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Armin Schulz

    Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.

    About the author



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