October 28th, 2022 | 10:44 CEST
Defense Metals, Alibaba, adidas - Which investments are valuable now
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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.
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
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