December 21st, 2021 | 10:14 CET
BYD, Defense Metals, Nordex: Opportunities in a weak environment
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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 neck blow has hit home
BYD is a leading manufacturer of e-cars. The Chinese started with their own batteries and installed them in e-scooters and other vehicles around ten years ago. In the meantime, the business has advanced, and BYD offers its own vehicles, which are particularly well received on the Chinese market. As a Chinese company, BYD has always benefited from access to raw materials. BYD is also very broadly positioned today and, in addition to its production of batteries, also offers its own chips. Given the global shortage of semiconductors, these are good prerequisites for gaining market share in difficult times.
But what is the current situation of the share? The global turmoil on the markets has also put BYD under pressure. Over five days, the share price fell by around 8.6%. The upward trend in the one-year chart currently looks at least endangered. How can investors deal with this? Given the positive environment for BYD, the stock should also become attractive again in the medium term. One risk, however, is the recently announced ban in the US on subsidies for companies related to China. In the future, these companies will no longer be promoted under the "Buy American" label, even if they operate plants in the US. For BYD, this is a blow. It will be interesting to see how such tensions end.
Defense Metals with feasibility study: Rare earths outside China
If the tensions between the US and China are increasingly played out on the international markets, Defense Metals should benefit in several ways. The reason: the Company operates one of the few promising rare earth projects in North America. In late November, the Company released a preliminary feasibility study that, among other things, projects an internal rate of return (IRR) of 16%, a capacity of 1.8 million tons of rock annually, and a mine life of 19 years. Defense Metals' Luisa Moreno emphasizes that the Project has three key ingredients to be successful: promising geology, a proven processing operation, and good infrastructure within a secure legal framework.
A few months ago, Defense CEO Craig Taylor already spoke about the advantages of his Company being located in Canada: "If we want to enjoy high-tech components, electric vehicles and clean, sustainable energy, secure supply chains are essential. With China's growing economy and commitment to domestic production of electric vehicles, the country will become an importer of rare earths rather than an exporter in the not-too-distant future. China is capable of consuming more rare earths than it produces, and then there will be nothing left for the rest of the world, as China is now responsible for 80% of the rare earths mined," Taylor said at the time. Defense Metals shares reached EUR 0.40 in mid-February and have been consolidating since then. Given the positive outlook around the Wicheeda project, investors can bookmark the share.
Nordex: This is the way forward!
The fact that rare earths are not only found in smartphone displays or electric cars is better known in Rostock than anywhere else. Germany's best-known wind turbine manufacturer Nordex has its headquarters there. The Company is also active outside Germany and recently scored with orders, especially from South America. On the other hand, investors were negatively affected because the margin in 2021 is expected to be only 1.0%. Among other things, Nordex cited higher raw material prices as the reason. In order to stabilize the margin in the medium term, it will also be necessary for Nordex to conclude supply agreements and secure the supply of raw materials in the long term and place the supply on a broad foundation. The stock failed to overcome the resistance around EUR 16.55 a few weeks ago. The Rostock-based share is currently out of steam.
All of the three presented shares around e-cars, renewable energy and rare earths are currently little in demand on the market. While BYD seems to have the highest drop, Nordex is already trading at its low for the year. The situation is similar for Defense Metals. Here, progress around the rare earth project in Canada could provide impetus even in a weak market environment.
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