13. September 2021 | 10:41 CET
K+S, Deutsche Rohstoff, Barrick Gold: How investors profit from inflation
Prices are rising and rising! In August, inflation rose more sharply than at any time in the last 28 years. It rose by an average of 3.9% compared with the same month of the previous year. The main price drivers were food and energy commodities. But other products and services are also becoming more and more expensive. Here is how investors can take this trend into account in their portfolios.
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ISIN: K+S AG NA O.N. | DE000KSAG888 , DT.ROHSTOFF AG NA O.N. | DE000A0XYG76 , BARRICK GOLD CORP. | CA0679011084
"[...] 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
K+S: Hopeful takeover fantasy?
When it comes to rising food prices, many investors immediately think of the K+S share. The fertilizer specialist looks back on turbulent months. At first, the share was seen as a never-ending tale of woe. But then the sale of a subsidiary in the USA succeeded and the share price breathed a sigh of relief. The share has now been moving sideways for several months. Recently, however, K+S has once again become the focus of investors: takeover speculation arose after the BHP Group announced its intention to invest in potash projects on a large scale.
As K+S still suffers from a low equity ratio and the share price has stagnated for some time, the Company could become the focus of potential buyers. To what extent the speculation will become a reality, however, is unclear. Due diligence measures often drag on for a long time, and the share price does not gain momentum despite the vague interest in a takeover. However, the existing fantasy should support the share. Added to this is inflation, which is picking up speed worldwide. K+S is no longer a great opportunity, but the stock still passes as a solid investment with price fantasy.
Deutsche Rohstoff AG: Inflation investment from Mannheim
Deutsche Rohstoff AG is a company that benefits directly from rising energy commodity prices. The Mannheim-based Company successfully produces oil in the US and has avoided all the adversities surrounding the oil price collapse and the Corona pandemic in recent years. On the contrary, the Company even purchased production areas at particularly favorable conditions during this market phase. In the meantime, oil is trading well above the USD 70 mark, and the project acquired at that time is probably worth more. Most recently, Deutsche Rohstoff AG made further purchases and acquired 30,000 net acres, also in Wyoming. The deal is expected to close by the end of October. Specifically, this is existing production with the prospect of growth.
In addition to the oil business, Deutsche Rohstoff AG is also focusing on investments. It holds shares in companies involved in the mining of gold and tungsten. The latter metal is particularly interesting and has properties that no other element can offer, such as high heat resistance. Specifically, Deutsche Rohstoff has a stake in Almonty Industries. This Company is bringing the largest tungsten mine outside China into production in South Korea and promises a life of more than 20 years. Deutsche Rohstoff's numbers are also in order: in 2021, the Company is targeting an EBITDA of EUR 57 to 62 million. Analysts at First Berlin currently see a price target of EUR 24. The business magazine CAPITAL also recently took a positive view of the share.
Barrick Gold: Investors are getting out
Things are currently looking worse for gold giant Barrick Gold. The Company continues to be unable to convince investors of its merits. Although the mood in the gold sector is positive, the share has lost 35.5% in the past year. In August, billionaire Stan Druckenmiller, who held shares in Barrick with his family office, had enough - the investor and self-declared gold bull got out in the media. Remaining investors have been waiting for a long time for a liberation blow. However, this has not happened for months. The share is therefore not very interesting at the moment.
The example of Barrick Gold shows that a big name is no guarantee for successful business. Size is often a hindrance in the commodities market. This was also the case with K+S, which suffered from the market and less lucrative investments for a long time. Deutsche Rohstoff AG, on the other hand, is much more agile, acquires stakes in promising raw materials and can act quickly when market opportunities arise. German investors also have the advantage that the Company is based in Mannheim, and there is no language barrier.