Close menu




October 28th, 2022 | 10:44 CEST

Defense Metals, Alibaba, adidas - Which investments are valuable now

  • Mining
  • RareEarths
  • ecommerce
Photo credits: pixabay.com

World power China is on everyone's lips: just recently, the term of the head of state Xi Jingping was extended for another five years for the third time in a row. China's flagship technology company, Alibaba, is slipping this week in terms of share price below the issue value at its IPO in 2014, with investors looking for alternatives in the face of the world power's increasing monopolization in global markets. Rare earths, for example, are high on the list of precious commodities when it comes to renewable energy production. The Canadian mineral explorer Defense Metals can be a successful alternative to align investments strategically. Sporting goods manufacturer adidas seems to be without a strategy at the moment. The stock is down 17% this week, and the Company is quite late in parting ways with scandalous rapper Kanye West. The rapper attracted more than unwelcome attention with his anti-Semitic comments. We look at where investments are now turning into real winners.

time to read: 6 minutes | Author: Juliane Zielonka
ISIN: ADIDAS AG NA O.N. | DE000A1EWWW0 , DEFENSE METALS CORP. | CA2446331035 , ALIBABA GR.HLDG SP.ADR 8 | US01609W1027

Table of contents:


    Defense Metals - Rare earths from Canada for green technologies

    In addition to fossil fuels, rare earths are needed for the expansion of renewable energies such as wind power and solar. Rare earths are a group of various metals needed in climate-neutral and future technologies due to their different physical and chemical properties. They also find practical use in defense technologies.
    World power China has the largest reserves of this type of raw material and is also the most important exporter. According to an analysis conducted by the United States Geological Survey analysis, 37.9% of the world's rare earth deposits are located in China.

    **All the more important for investors to look for reliable alternatives that strengthen portfolios in the face of geopolitical upheaval.
    Rare earths are relatively abundant in the earth's crust, but mineable concentrations are less than most other mineral commodities. In North America, measured and indicated rare earth resources are estimated at 2.4 million tons in the US and more than 15 million tons in Canada.

    Defense Metals Corp. is a Canadian mineral exploration company focused on the acquisition of mineral deposits. The Canadian Company has a mineral resource of 5 million t with a rare earth content of approximately 2.95% TREO (Total Rare-Earth Oxide) and an inferred mineral resource of 29.5 million t averaging 1.83% TREO.

    Its flagship project is the Wicheeda acreage in British Columbia, acquired in January 2022. The rare earth deposits offer a key position in the North American market. The project is located close to key infrastructure and is, therefore, easily accessible. The property is located on a major forest road that connects to BC Highway 97. A major hydroelectric transmission line, a major gas pipeline and the Canadian National Railway line run near the property. The nearest major town is Prince George, British Columbia, a mining center with a skilled workforce located 80 km southeast.

    Production of a high-grade flotation concentrate averaging 43% rare earth oxide (TREO) is planned for direct sale to the market in the first four years and then to feed a hydrometallurgical plant at the project. Revenues derived from this could average CAD 381 million per year from the sale of rare earth concentrates (years 1-4) and mixed rare earth hydrometallurgical tailings (years 5-16). The project has a pre-tax NPV of CAD 761 million and an after-tax NPV of CAD 517 million at a discount rate of 8%. The pre-tax internal rate of return (IRR) is 22%, and the after-tax IRR is 18%. Defense Metals is thus strategically and financially well-positioned to play a critical role in rare earth discovery and extraction.

    Alibaba - Is it worth getting in now?

    How strongly political events influence stock prices was recently demonstrated by the price trend of Alibaba shares. At the 20th National Congress of the Communist Party of China, its head of state, Xi Jinping, was re-elected for the third time in a row. He will thus remain in office for another five years.

    The economic situation in China is anything but rosy: Export growth weakened to 5.7% in September. Retail sales are down as local consumers face renewed COVID-19-related lockdowns. In the wake of his re-election and thus gained power, Jinping is filling other key positions on the Politburo Standing Committee with more like-minded people, including Beijing Party chief Cai Qi and Shanghai Party chief Li Qiang. The latter had ordered weeks-long lockdowns of China's financial center earlier this year, despite the devastating impact on the economy.

    For investors, that means extreme caution about buying or holding stocks like Alibaba. The power structure within the Chinese party leadership has become so dense that it is obvious to protect the state first in case of conflicts or crises. Even before the economy.
    Currently, at EUR 66.15, the stock is below the IPO price of USD 68 on September 18, 2014. Investors with an affinity for risk argue that due to the price slump, now is the opportunity to go on a shopping spree with Alibaba. Alibaba has so far relied on the growth of its cloud business to offset the slowdown in its e-commerce business. **However, increased competition, stricter regulations and changing user behavior have also stifled growth over the past year. Mention should also be made of ByteDance, achieving success with TikTok that Alibaba missed.

    **China's smoldering conflict with neighbor Taiwan is also not yet over and may have a significant negative impact on the markets if China makes good on its threat and takes possession of the country.

    Adidas - Share continues to plummet

    The sporting goods manufacturer in Herzogenaurach currently has some fires to put out. In August, the Company announced it was parting ways with current CEO Kasper Rørsted.

    Adidas posted a meager 4% third-quarter revenue and net sales of EUR 6.41 billion. The Company nevertheless expects double-digit sales growth in the final quarter of the year due to events such as the World Cup in Qatar, it said. But the brand is not covering itself with glory at all right now. US rapper Kanye West attracted attention this week with anti-Semitic slogans, causing him to lose advertising partners like Balenciaga, Gap and now adidas. In Tuesday's press release statement, adidas said, "we dodo not tolerate anti-Semitism or any other type of hate speech." West's recent comments were "unacceptable, hateful and dangerous."

    The problem for adidas on this public disconnect is timing. Kanye's comments happened far earlier than the announcement of the dissolution of adidas' advertising partnership. A comment West made on the Drink Champs podcast on October 16, according to Entertainment Tonight, led to the trending hashtag #BoycottAdidas and increased pressure on the Company. "I can say anti-Semitic things and adidas can't drop me. Now what?" said West at the time. Adidas shares fell 17%, and just this week(!), adidas announced the split.

    Is it because of the corporate bureaucracy? Is there a lack of decision-makers? Investors were already voting with their feet before adidas even reacted. The brand has suffered so much damage as a result that even a soccer World Cup in Qatar can't strongly travel around the relegation course. Economic growth also requires social standards, which presuppose an ad hoc reaction.

    Adidas, meanwhile, is poking around in the fog of crisis communication, standing in the dark forest of the lost trust of its investors and, above all, struggling with its textile partner China, whose production is on shaky ground due to the Zero-COVID strategy. With no leadership, slow corporate communications, and questionable sponsorships - investors would do well to look twice when investing.


    Real winners on the stock market abide by social rules; otherwise, investors vote with their feet beforehand, as in the case of adidas. The share price of the sporting goods manufacturer fell by a full 17%, blaming its poor results mainly on production partner China due to the lockdown policy there and the resulting delivery delays and cancellations. Alibaba's e-commerce business is also affected by this, and it is, therefore, still doing everything it can to get its cloud business to grow. But investors should remain on guard. The situation is different in Canada. There, mineral explorer Defense Metals has ESG policies in place that take into account both land and people and are in line with societal standards. In the long run, any investor who goes long should think carefully about what will gain more value.


    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.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

    The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.


    Der Autor

    Juliane Zielonka

    Born in Bielefeld, she studied German, English and psychology. The emergence of the Internet in the early '90s led her from university to training in graphic design and marketing communications. After years of agency work in corporate branding, she switched to publishing and learned her editorial craft at Hubert Burda Media.

    About the author



    Related comments:

    Commented by Fabian Lorenz on December 1st, 2022 | 11:55 CET

    Comeback stocks: Nel, Aurora Cannabis, Barrick Gold, Tocvan Ventures

    • Mining
    • Gold
    • Hydrogen
    • Cannabis

    Gold, cannabis and hydrogen could be among the top trends of the coming year - also on the stock market. Due to full order books, Nel could be poised for a comeback in 2023. At least sales are already secured until mid-2024. Now, all that is left is to cut the loss to reach analysts' price targets. Aurora Cannabis has largely completed its turnaround and is also hoping for legalization in Europe and the US. Driven by a strong gold price, mining stocks have already jumped. Now exploration companies should follow. Tocvan Ventures is one of them. And with the gold explorer, investors can look forward to a regular news flow in the coming year. Are the three candidates comeback stocks in 2023?

    Read

    Commented by Stefan Feulner on December 1st, 2022 | 09:46 CET

    BYD, Auxico Resources, Hensoldt, Rheinmetall - Prepared for the future

    • Mining
    • Gold
    • RareEarths
    • Defense

    Russia's invasion of Ukraine at the end of February this year changed everything. While global stock markets fell into a state of shock, shares in defense companies boomed. With the arms buildup in the Western world, the future looks bright for companies that were still viewed critically before the war of aggression. However, in order to produce enough tanks, aircraft and other war equipment, the industry needs a variety of critical metals for which demand already exceeds supply.

    Read

    Commented by Stefan Feulner on November 30th, 2022 | 12:01 CET

    Profit now from the energy transition - Rock Tech Lithium, Power Nickel, Shell

    • Mining
    • Lithium
    • Electromobility

    In the past, the internal combustion engine was at the center of the automotive industry, but this is now to change as quickly as possible in order to achieve the specified climate targets. Electrification is the magic word. However, there are high hurdles to overcome in implementing this. For example, it is still not certain whether the battery metals required for this, such as lithium, cobalt, copper and nickel, are available in sufficient quantities. Demand for the critical metals already exceeds supply. The beneficiaries are undoubtedly the producers of the scarce goods.

    Read