16. December 2020 | 09:55 CET
E.ON, Sartorius, Defense Metals: The scarcer the goods, the higher the price
Only in times of need do you realize what matters, and this is precisely what many businesses and private individuals are experiencing during the lockdown. Industry, too, can quickly find itself in need. The best example was the first few months of the pandemic when global supply chains broke down. Today, Asia is back on the growth path and the cargo ships are fully loaded. But the industry could still be in trouble - for example, if the energy supply collapses. Only recently, it became known that increasing electromobility is causing load peaks in the power grids - for example, after work. Utilities such as E.ON want to take countermeasures and, if need be, implement so-called "peak smoothing." This implementation plan would mean that charging stations would no longer be supplied with electricity when the grid load is high. Anyone still wanting to drive an electric vehicle in the evening would be left out in the cold.
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ISIN: CA2446331035 , DE000ENAG999 , DE0007165631
E.ON: Good conditions for rising share prices
The above example shows how fundamentally essential consumers like E.ON are for Germany as an industrial location. The Company outsourced its conventional power generators a few years ago and is now focusing on regenerative energy as well as line networks. The latter in particular are becoming increasingly important - after all, regenerative power sources have to be connected to the grids. Many wind turbines in coastal regions only make sense if the electricity subsequently also flows to the industrial sites in southern Germany.
Although E.ON's stock has lost 5.5% of its value over a one-year period, there is a growing conviction in the market that utilities also have prospects for investors. In particular, the promotion of sustainable investments could lead to suitable conditions for companies like E.ON. Added to this is the dividend yield of just under 5%. Given its low equity ratio, E.ON is not a classic value stock, but it is nevertheless well positioned.
Sartorius: More than a pandemic profiteer
Sartorius is also well positioned. The specialist for laboratory supplies and disposables in drug manufacturing is considered the Covid-19 stock apart from the vaccine manufacturers. Although the dividend is negligible after the share price gains, the payout could also go up again in the long term. After all, the business is running smoothly. For 2020, sales should climb by more than 20%. Sartorius should also continue to profit in 2021. After all, the production of drugs and vaccines is likely to continue at full speed in the coming year.
Sartorius is also performing well away from the pandemic and acquired several areas at the end of 2019. Another positive is that Sartorius is well-positioned in Europe, the USA and Asia-Pacific. After nearly 100% in a year, the share could take a breather, but when this will happen remains uncertain. Sartorius' products and services are too much in demand, so market exaggerations are likely to continue.
Defense Metals: Good underlying conditions, speculative share
Defense Metals is still a long way from a share price performance like that of Sartorius. However, the Canadian Company is also sitting on an essential commodity: rare earths. 90% of this critical raw material is mined in China and found in many products, such as consumer electronics and rechargeable batteries. Defense Metals is developing one of the few rare earth properties in North America, emphasizing the strategic importance of the metals, including to the defence industry.
Recently, Jamie Spratt, an expert in corporate finance, joined the Defense Metals team. The appointment is a sign that Defense Metals wants to get down to business as quickly as possible. The Company has an option to buy the Wicheeda rare earth project near the Canadian city of Prince George. Exploration drilling has already shown promise in recent months.
Given the growing scarcity of rare earth metals and the simultaneous increase in demand for raw materials from regions with high environmental standards, the general conditions for Defense Metals are considered good. However, as the Company is still only valued at just over EUR 7 million, the stock must be regarded as speculative.