October 27th, 2022 | 12:58 CEST
Buckle up for the comeback?! BYD, Globex Mining, Deutsche Bank
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"[...] 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
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
BYD: This hopeful is under a bad star
The BYD share has lost a lot of ground in recent weeks and months. The carmaker and provider of renewable energy solutions was sold off by the market. The reasons lie less in the Company itself than in the general conditions. According to experts, the new growth figures from China should be treated with caution. Likewise, there is an increasing trend worldwide for camps to form: The West on the one hand and the emerging countries on the other. But the latter scenario must be put into perspective: For China, long-term success will only work with demand from Europe or the USA. The worries that BYD could lose markets in the long term are far-fetched but correspond to the spirit of the times.
This fact alone could be an argument for taking a closer look at the stock. BYD is considered a very innovative company and offers the business areas of automobiles (approx. 51% of sales), smartphones (40.5%) and batteries/photovoltaics (approx. 7%). BYD wants to take off with its cars in Europe soon. The first tests are promising. Customers get a lot of car for their money, and nothing is cheap in BYD cars, neither under the hood nor in the interior. So the market launch could well be a success. The Company has even greater potential with its photovoltaic activities. Here, too, BYD's solutions are considered to be of high quality. Examples include electricity storage systems for houses. Although the share price has fallen back, this is not a disaster in the long term. However, investors need to consider the geopolitical tensions and keep in mind that even successful companies in authoritarian China can fall by the wayside. In terms of political factors, investors have to make allowances for every stock from China.
Globex Mining: Facts instead of hope - hundreds of projects at a ridiculous price
The situation is completely different for Globex Mining. The Canadian company is solid for two reasons: Firstly, it operates from Canada and secondly, it collects promising raw material projects from North America - as if the motto of the first German Chancellor, "No experiments", had become investable. However, being down-to-earth alone will not win you a pot of gold on the stock market. Globex continues to develop its projects and transfers them to joint ventures in order to leverage potential there. Globex Mining has over 200 commodity projects ranging from precious and industrial metals to lithium. Many properties are in an early stage, but in some cases, even feasibility studies and resource estimates are available. Just recently, a resource estimate for the Nordeau gold project was announced.
The stock of Globex Mining is particularly interesting given the new euphoria on the stock market. Although dirty bombs are being threatened by Russia and economists are declining various recession scenarios up and down, the stock market is flourishing. On the one hand, this may indicate that the worst is already priced in or that the market is gradually factoring in inflation, war economies, and the parallelism of supply chains and economic systems. Even though it may sound absurd, a rally to the point of renewed irrational valuations cannot be ruled out in the event of sudden positive events. This could be peace in Ukraine as well as a freeze of the conflict with less potential for escalation. A declared end to the interest rate turnaround could also allow the markets to breathe a sigh of relief. The turmoil in the bond market is also likely to offer irrational consequences for equities. With its tangible assets in the ground, Globex Mining is a real asset investment. The valuation of around CAD 35 million is nothing short of a joke in light of hundreds of resource projects. While companies like Globex are rarely fairly valued, there could be upside potential in the current environment. Risks at the corporate level or due to the jurisdiction in which Globex operates are almost impossible.
Deutsche Bank: A real comeback or just a show for former stars
When it comes to comebacks, the Deutsche Bank share is also currently attracting attention - after all, it has risen by around 20% in the past four weeks. Most recently, the news that UBS's Swiss rival is again attracting more wealthy clients created a good mood in the sector. Added to this is the interest rate turnaround, which could ensure that Deutsche Bank's bread-and-butter business picks up again: Loans are still the best way to make money as a bank. Net interest income accounts for about 43% of Deutsche Bank's gross income. But with the housing market weakening worldwide, it doesn't look like new deals will be plentiful in the coming quarters. In investment banking, much is overshadowed by the "R-word". If the recession comes and lasts, investment bankers are likely to twiddle their thumbs rather than roll over bonuses.
Deutsche Bank has recently reduced some risks on its balance sheet and should thus be relatively crisis-proof. However, it is still being determined how market developments will affect the share price. Banks are and remain highly complex companies that surprise even experienced analysts. An investment in uncertain times is, therefore, not very obvious. It would be more obvious to bet on the innovative company BYD. But here, China's malus and political risks come into play. In contrast, the Globex Mining share is fundamentally solid but by no means boring. Hundreds of raw material projects at around CAD 35 million seem good value - even without using a calculator.
Conflict of interest
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