05. July 2021 | 12:08 CET
BYD, Kodiak Copper, Varta: E-car investments - here is how investors reduce risks
Copper is the metal of the past fifteen months. Why? Quotations stabilized early on after the Corona Crash. At first, only industry insiders took notice of this relative strength. But it was the starting signal for a copper rally, unlike anything the industrial metal has seen in a long time. From the low in 2020 to the high in 2021, copper has climbed by almost 140%. Which trends are responsible for this, and how investors can invest.
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ISIN: BYD CO. LTD H YC 1 | CNE100000296 , KODIAK COPPER CORP. | CA50012K1066 , VARTA AG O.N. | DE000A0TGJ55
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
BYD: Perfectly positioned, but...
Copper is primarily an industrial metal. Whenever more steel is used, the price of copper also rises. However, copper is now also a future metal: there is around three times more copper in electric cars than in classic combustion engines. Even the charging infrastructure cannot do without the metal with the distinctive color. It is no wonder, then, that the surge in shares such as those of the Chinese electric car manufacturer BYD has also boosted copper. BYD climbed by a whopping 251% in the past twelve months. Most recently, the share price has again risen like clockwork. But what is the reason for this?
More and more market participants recognize BYD's outstanding market position. In addition to its battery production, the Company also has its chip division. While giants like Volkswagen could first expand their supply chains in this direction and seek investments around promising suppliers, BYD already has everything a modern automaker needs. The vehicles are also convincing, and some can already drive over 1,000 kilometers on one charge. The downside of this promising market position is the already ambitious valuation - the market has generously distributed advance praise in recent months. As a result, the share is therefore no longer inexpensive.
Kodiak Copper: Operational success, wait and see approach
The situation is different for Kodiak Copper. The Canadian Company is best known for its MPD copper-gold project in the Canadian district of British Columbia. Over the past year, drill results are causing the stock to rise like a phoenix from the ashes. The rally took the stock from CAD 0.50 to CAD 3. The Company then raised fresh capital, and the stock stabilized above the CAD 1.50 level. Kodiak also made progress operationally: in addition to further encouraging drill results, such as a 213-meter intercept with grades of 0.65% copper, the Company purchased an adjacent property that is also believed to contain promising deposits of copper and gold. Kodiak thus has 14,716 hectares of project area. The new property is also accessible year-round via roads and connects to locally existing infrastructure.
Already several times this year, Kodiak Copper's share price twitched upwards and scratched the CAD 2 mark in Canada. Currently, the value has come back again. Investors who want to invest in high-growth companies instead of commodity multinationals can take a closer look at the value. Even with small capital investment, investors have a foot in the door and can profit from the dynamics of a speculative small-cap from the copper sector. In order to limit the risk, it is advisable to orientate oneself on the previous price trend. In 2021, the value never traded below CAD 1.38. Kodiak Copper should be solidly supported here.
Varta: Batteries "Made in Germany" as a success story?
Much better known than Kodiak Copper is the share of Varta. The battery manufacturer is primarily known for its high-performance button cells. At the end of the year, Varta also wants to take the plunge with batteries for electric cars and is planning pilot production. Since many German carmakers are looking for partners in this area and batteries "Made in Germany" are also likely to be in demand among customers, the story is highly traded on the stock market. But the euphoria is already fading - investors have realized that Varta will not become a German BYD. It is not clear whether the Company is competitive - after all, the Asians have been building e-car batteries for quite some time. Investors are well-advised to wait and see.
Better to invest at the beginning of the value chain: While BYD is already expensive and Varta's success somewhat uncertain, Kodiak Copper's stock could be a good compromise. The Company has already made a name for itself on the scene but is still moderately valued at around EUR 50 million. In addition, Kodiak is likely to benefit from the boom in electric mobility regardless of whether Varta's batteries or BYD's ultimately win the race. Especially when industries are still developing, investing at the beginning of the value chain makes sense.