August 4th, 2022 | 13:14 CEST
Currency crash? Here's what opportunities look like! Barrick Gold, Globex Mining, PayPal
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"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
Barrick Gold: Precious metals remain a substitute currency
Rising interest rates have made gold less attractive relative to time deposits and bonds at first glance. But let's be honest: no one is seriously buying or selling gold because there are now 1.0% interest rates elsewhere! Gold is an anchor of stability in the portfolio that should be kept constant. The rising risk premiums for credit default swaps from the euro periphery show that the flip side of the interest rate turnaround could have far more dramatic consequences - the euro is in danger. Even those who think little of such doomsday scenarios must admit that the risk of a euro crash is greater today than it was a year ago. Gold is therefore worth considering for any investor.
The world's second-largest gold producer, Barrick Gold, traditionally profits in a positive market environment. After a correction from almost EUR 24 to below EUR 15, the stock could be ripe for a comeback. On August 8, Barrick Gold will publish quarterly figures. Then the Canadian Company could show that it has possibly come through the past months better than the market expected. Since gold stocks are typically negatively correlated to economic performance, stocks like Barrick Gold could also be a good recession bet.
Globex Mining: Share buybacks should support price
A bet on several commodities at once is the stock of Globex Mining. The Company's mission is to collect and upgrade prospective resource properties. Globex Mining has more than 200 projects and more than 80 royalties around the metals copper, nickel, lead, gold, silver, platinum, palladium, manganese, titanium, iron, molybdenum, lithium, cobalt and rare earths. In 2020, the Company sold seven projects, injecting capital into its coffers and securing future cash flows from royalty agreements. Last year, Globex Mining sold only one project. The number of exits is also expected to remain manageable in 2022.
For investors, Globex Mining offers access to a comprehensive commodity portfolio. Because Globex is valued in the market like a larger exploration company, with perhaps one or two advanced projects, Globex offers great potential in the form of 'deep value'. While it is unlikely that the market will price in the value of each project, even a promising exit with a favorable license agreement would be enough to alert the market to the opportunities around Globex's immense reservoir of resource projects. After a correction from EUR 1.40 to EUR 0.70, the stock seems cheap again. Globex Mining itself also sees it that way - the Company recently announced its intention to acquire 1.8% of its shares on the market. That should also support the course.
PayPal: This is where it is happening!
When it comes to alternative currencies, PayPal's stock was also considered a hot bet until some time ago. The payment service provider opened up to cryptocurrencies years ago and has good connections with potential customers. Once crypto becomes socially acceptable, PayPal is likely to be the first port of call, was the thinking at the time. In the meantime, bitcoin has crashed, and PayPal has reported mixed quarterly figures - operating profit fell 32% to USD 764 million in the second quarter. On the other hand, things look better in terms of revenue and the number of transactions - here, PayPal made gains. This is probably one of the reasons why the share price rose despite the weak figures. The entry of the hedge fund Elliott Management led by Paul Singer, known for interfering in companies and ensuring good figures, also weighs positively. As with Globex Mining, PayPal also wants to score points on the market with share buybacks.
There are also parallels in the chart between PayPal and Globex Mining - both companies have had a steep sell-off. At PayPal, however, the bottoming is a bit more advanced. If the rise above the interim highs of March succeeds, it can go up again here. In the case of Globex Mining, investors may have to wait a little longer for the market to recognize the potential. On the other hand, there is a lot of "deep value" in the balance sheet of the Canadian company.
Conflict of interest
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