May 31st, 2022 | 11:53 CEST
Funds will not resist here: BASF, Saturn Oil + Gas, Nordex
Table of contents:
"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
BASF: The air is out in the short term
BASF shares have become the plaything of speculators in recent weeks and months. On the one hand, the Ludwigshafen-based Company has done good business with Russia for many years, but on the other hand, the energy needs of the gigantic chemical plant, which shapes an entire city and region, are enormous. Both business with Russia and the age of cheap energy have reached their zenith. This is also reflected in the share price: in the past 52 weeks alone, the stock has fallen by around 23%. However, the share price has recently shown some hope - in the past 5 trading days, BASF has staged a small recovery rally. Where do we go from here?
From a chart perspective, the share will only return to safe waters above the EUR 55 mark. Then, the first step towards a turnaround could be taken. Until then, investors need to be cautious with BASF. Although the Company has set itself the goal of being a leader in sustainability and ESG, which is also reflected in corresponding sustainability ratings, the business model remains vulnerable in the short term. The Company from Ludwigshafen has mastered many crises in the past, but at least in the short term, there are currently better alternatives than BASF shares.
Saturn Oil & Gas: Dividend prospects and mini-valuation
While the shares of the chemical giant are likely to be on the lists of many investors, the situation is still different for the young oil producer Saturn Oil & Gas. Yet the Company shines with low valuations, growth potential and a sharpened ESG profile: Only recently, Saturn Oil & Gas significantly raised its guidance for the current fiscal year and reported an expected enterprise value measured by expected EBITDA of only 1.3 compared to previous figures.
Saturn Oil & Gas is currently drilling new oil wells and bringing idle wells back into production. The Company is thus able to grow in an environment of high oil prices and, in the future, will benefit even more from gushing oil wells. After Saturn Oil & Gas had hedged a considerable part of its production against falling oil prices in the course of an acquisition more than a year ago in order to be able to pay off the associated loans, the market is now focusing more on growth. With company officials in recent weeks suggesting that debt could be repaid by the end of 2023, further fantasy is emerging. CEO John Jeffrey hinted at possibly putting the free cash flow into a dividend after debt service ends starting in 2024. The more professional investors do their own math on this prospect based on the numbers at hand, the better. Saturn Oil & Gas remains a value opportunity and is also well positioned around ESG: Just this weekend, the Saturn Oil Open, an ATP Challenger tournament that primarily provided a stage for promising young talent, came to an end. The tournament in Troisdorf was won by 24-year-old Lukas Klein from Slovakia.
Nordex: Bringing memories back to life
The Nordex share shows that investors should not always focus on the most obvious stocks in terms of sustainability. Over a period of one year, the share lost almost 39% of its value. For months, investors have been concerned about the margins of the wind turbine manufacturer from Rostock. Most recently, the Company also announced the closure of the Rostock plant - in the future, rotor blades will no longer be produced on the Baltic Sea. This brings back memories of the decline of the German solar industry around ten years ago. It remains hopeful that Nordex will be able to become more profitable thanks to these measures in order to survive in international competition in the long term. Recently, the German wind power pioneer simply had too little to show for its efforts.
If investors want to invest sustainably, ESG criteria and economic perspectives must go hand in hand. Those who only focus on supposedly clean industries risk losses. At the same time, a long list of sustainability ratings for established industrial companies is also no guarantee that risks associated with dubious business relationships or a huge appetite for energy are effectively reduced. In contrast, representatives from traditional industries that have designed their business to be sustainable from the outset, such as Saturn Oil & Gas, could provide positive surprises. The young oil producer is firmly rooted in Saskatoon and, as a result, practices sustainable values together with its employees and citizens. In addition, it has a comparatively low valuation and the prospect of dividends. This perspective could soon appeal to long-term investors.
Conflict of interest
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