June 24th, 2022 | 10:15 CEST
Commerzbank, Triumph Gold, Bitcoin Group - Inflation alert! Which stocks bring returns in this market environment?
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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
Commerzbank - Breakthrough through interest rate hike?
Commerzbank is a very interest-rate sensitive company and has therefore faced problems with the ECB's minus interest rate policy. While there have already been some interest rate hikes in the US, Europe is exercising restraint. The increase in interest rates from minus 0.5% to minus 0.25% in July is certainly not yet a liberating blow for Commerzbank, but if inflation remains as strong as it is, the ECB will also have to raise rates further. If interest rates rise by 1%, Commerzbank will earn around EUR 400 million more per year. Interest rates for real estate loans are already back at around 3%.
Due to the circumstances of recent years, the Group is in a transformation phase. Costs have been cut, branches have been reduced, and digitization has been driven forward. The latest quarterly figures showed that this strategy is slowly paying off, with the previous year's result more than doubling to EUR 284 million. Analyst estimates were thus significantly exceeded. Takeover rumors persist, partly because the German government wants to sell its stake in Commerzbank. A foreign bank has reportedly expressed interest.
In any case, there is currently a "lurking" feeling in the European banking sector. There is also a rumor that BNP Paribas is interested in ABN Amro. Is Commerzbank a good investment to protect against inflation? The stock has already done well, gaining over 60% at its peak since March 7. Currently, the stock is trading at EUR 7.84. The uncertainties surrounding electricity and gas supplies in Germany are fueling fears of a recession. The share was able to form a new high recently. Investors should wait for a major setback.
Triumph Gold - New gold mineralization discovered
The printing presses have been running at full speed for years, so it is not surprising that our inflation keeps rising. Gold is seen as a safe haven in these times because the price of gold has continued to grow over the long term. The demand for physical gold has been high in the past year. When investing in gold, one can also invest in gold explorers like Triumph Gold. Triumph Gold owns projects with more than 2 million ounces of gold, according to the NI 43-101 report. As an investor, one should pay attention to this metric, as gold covers a certain market capitalization, and possible undervaluations can be identified. The flagship project of the Canadians is called Freegold Mountain Project and is located in Yukon in the far northwest of Canada.
A total of 20 mineralized zones have been discovered in the area, with the 3 deposits, Nucleus, Revenue and Tinta Hill alone responsible for the 2 million ounce mineral resource estimate. This year, the Company presented two exploration results from the 2021 drill program. A total of 6,615m of diamond drilling was completed on the 200 sq km Freegold Mountain property. Anomalous gold, silver and copper values were encountered in all 12 drill holes. The results suggest a broad mineralized system. Step-out drilling 300m from the Nucleus deposit encountered additional gold mineralization.
At peak, the gold grade was 4.45 g/t, and an additional 4.90 g/t silver and 0.31% copper were encountered. Around the area are larger deposits from Newmont Corporation, among others, which holds a 12.8% interest in Triumph Gold. Management also holds a total of 5.1% of the Company's shares. The stock recently ranged between CAD 0.07 and CAD 0.095. Currently, the share stands at CAD 0.075, putting a value of just CAD 10.4 million on the scales. Even if we only take a value of USD 50 per ounce in the ground as a basis, the upside potential is enormous.
Bitcoin Group - The forecast is gloomy
Cryptocurrencies were long considered the new safe haven against all the paper money that central banks were printing. It was also already considered a better inflation hedge than gold as cryptocurrencies moved higher. However, after the hype, some investors have lost the desire to look at their cryptocurrency portfolios. Bitcoin has lost over 70% of its value since last November. That wouldn't have happened with gold. Those who do not want to invest directly in cryptocurrencies can look at the Bitcoin Group. It offers a trading place for various digital currencies via bitcoin.de.
A fee of 1% is charged per transaction, which the buyer and seller share - an ideal business model for the Company that can thus accumulate cryptocurrencies. On May 17, the Company published its 2021 annual figures, with revenue increasing by 69.3% to EUR 25.4 million. EBITDA even increased by 87.6% to EUR 19.7 million. As a result, earnings per share were EUR 2.67. At the end of December, the Company held cryptocurrencies worth around EUR 181 million. Assuming the Company has not sold these assets, this figure is likely to be significantly lower today.
This is also reflected in the forecast of the Management Board, which expects a slight decline in revenue and aims to land in the upper single-digit million range in terms of EBITDA. If you compare that with last year's result, earnings will be roughly halved. The stock has already anticipated that. From the 2021 high to today, the share has lost around 65% in value and is currently trading at EUR 26.56. Based on the 2021 result, the share has a price/earnings ratio of 10, which is favorable. However, with the current forecast, it is already at 20. Anyone who wants to bet on a rise in cryptocurrencies is well advised with Bitcoin Group.
The Commerzbank share has already had a rally and currently has to deal with recession fears. Here, one should wait for a setback. In the case of Triumph Gold, the stock is significantly undervalued when you compare the market capitalization with the gold deposits. The stock could jump quickly, as it did in 2020, if gold prices rise. Bitcoin Group has an interesting business model and is certainly well worth a look for crypto enthusiasts. Currently, the stock is suffering from the weakness of cryptocurrencies. Cryptocurrencies cannot offer inflation protection as the values are too volatile.
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") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
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