October 6th, 2021 | 11:57 CEST
China Evergrande, Triumph Gold, Gazprom: Investing in uncertain times
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"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
China Evergrande: Are Swiss banks trembling?
The share of China Evergrande is an example of the current market situation - you do not know whether things will turn out good or bad in the end. Most recently, reports have been heard that Swiss banks, in particular, could be affected by a bankruptcy and the resulting market dislocation. Swiss banks are much more heavily involved in Asia than those from the EU. The focus is on UBS, Credit Suisse and Julius Baer. These banks, he said, now serve many wealthy Asian private clients, who in turn are heavily involved in real estate in China. However, it is not clear to what extent the problems surrounding China Evergrande will ultimately have on the banks.
What is certain, however, is that the China Evergrande share was and is a hot potato. Currently, the stock is suspended from trading. Some interest payments have not been serviced, and the situation is coming to a head - from a large-scale rescue to bankruptcy, everything is conceivable. Even if the share should be traded again in the coming days, the paper remains a plaything for gamblers. Those looking for a quick euro can just as quickly be wrong - a renewed suspension of trading followed by an existential development would be fatal for gamblers. Therefore, it is advisable to steer clear of the stock and avoid other fallen real estate stocks from China.
Triumph Gold: Drill results in October
When the markets are running high, and nervousness is rising, stocks from the gold sector can come to life within hours. One of these stocks could be Triumph Gold. The Company most recently completed a drill program at its Freegold Mountain project. This involved drilling 19 holes and 6,615 meters. The Company plans to announce results from this drilling before the end of October. With previous lead geologist Brian May now Triumph Gold's new president, the drilling is likely successful from management's perspective. However, the market has not yet priced in a positive development.
The property is about 200 sq km in size and offers prospects for copper as well as gold. As neighbor and mining giant Newmont has a 12.8% stake in the Company and there are also many institutional holdings, the upcoming drill results are likely to attract attention. Anti-cyclical investors can take advantage of the current low share price level with a valuation below EUR 20 million and take a closer look at the Company. Triumph Gold is financed and has been working on its project with focus for years. Should the market turn downward in the wake of a shock event, safe havens are likely to be sought again after an initial period of weakness. Triumph Gold is a speculative stock that investors can make a note of.
Gazprom: An (almost) sure thing
The Gazprom share also appears to be a good choice at present. Energy is becoming scarce in China, and Europe is also facing winter. Given the increased prices for oil and gas, Gazprom can already rub its hands. Since most German households use gas for heating, the upcoming cold months should be good business for Gazprom. The Moscow-based company has already been doing well recently, with sales in the first quarter of the fiscal year climbing by more than 30%. As Gazprom expanded important pipeline capacities, sales in Eastern Europe also rose. In addition, Gazprom can also deliver to China alongside the Nord Stream 2 Baltic Sea pipeline, which ends in Germany. Gazprom is perfectly positioned and offers an exciting dividend. On the other hand, the weaker ESG profile and the political risk around Russia weigh negatively.
While Gazprom is a solid dividend stock with minor weaknesses, China Evergrande is a no-go for investors. However, if the gas giant from Russia is too boring for you, you can think about smaller companies from the commodities sector and allocate them carefully in the portfolio according to their higher risk. With Triumph Gold, the timing could be favorable for such an approach.
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