Market failure! Highs and lows at BASF, Myriad Uranium, Vonovia

BASF: Cards reshuffled

When Putin's tanks rolled across Ukraine's border on February 24, 2022, unrest was likely to be heard in Ludwigshafen. BASF, the chemical company from the Rhine, has been heavily dependent on cheap energy from Russia, especially for its basic chemicals production. The sanctions changed the market for BASF overnight. Today, little more than a year later, BASF has scaled back large parts of its chemicals production in Germany and is looking more than ever to China for its future.

Critics believe that BASF is thus trading one dependency for another. In fact, BASF finds both cheap energy and a huge sales market in China - the move to Asia is seen as having no alternative, especially from the point of view of BASF CEO Martin Brudermüller. Most recently, Saori Dubourg, a critic of the Company's business in China, left the Board of Executive Directors. It seems that BASF's path to China is sealed. But the associated risk remains high. At BASF, the risks currently outweigh the rewards. The market takes a similar view: the share has lost around 12% over the past year.

Myriad Uranium: Promising project in Niger

Myriad Uranium's stock was much more successful last year - the share returned around 120% in 12 months for the daring investors of the first hour. Myriad Uranium operates a uranium project in Niger, Africa. The French energy company Areva once produced uranium in the region for its domestic nuclear power plants. Myriad Uranium's property is about 1,800 sq km and intersects geological trends where promising uranium projects, including Global Atomics, are already located. Matching the property that Areva once preferred to explore, Myriad Uranium also has 24,000 meters of historical drill data and geomagnetic survey results. Although Niger is an emerging uranium region and Myriad Uranium's project has promising fundamentals, even after last year's rally, the stock is valued at only a high single-digit million dollar amount.

The background to this valuation is the fact that the uranium market was considered uninteresting for many years. Between 2016 and 2022, global uranium production fell from 160 million pounds to 130 million pounds. Many mines that have been in operation for years could also become depleted in the foreseeable future. Other players like Kazakhstan are deliberately curbing production to support the market price. At the same time, China, India and the US are building new power plants. Even Japan has announced the construction of a new plant. Since it takes a long time in the mining sector for new capacity to be reflected in prices, the upward trend in the price of uranium is unlikely to come to an end in the foreseeable future. For companies like Myriad Uranium, the chances are growing that a project idea could turn into a mine - with all the associated consequences for shareholders.

Vonovia: Every party has its day

Anyone considering investing in the uranium market today could strike a similar good timing as a real estate buyer in the early 2010s. Back then, low interest rates determined the price of real estate for years to come. The past rally has made many owners of homes and land rich. But if you invite people to a party, you get to end it: As the ECB's interest rates have risen, real estate prices have also begun a downward slide. Official market data with declines of between 3 and 7% depending on property type and location only conceal the fact that many properties are now barely tradable. Real estate is more than ever, an illiquid asset class. Shares like those of the real estate company Vonovia are also suffering under these conditions. Although rental market expectations are rosy, real estate companies' valuations always include a pinch of financing risk. And that is something investors are particularly keen to avoid at the moment.

When something changes overnight in a market that used to function well, the companies involved are condemned to take action. BASF is looking to China, and Vonovia is sitting out the current situation - analysts have recently expressed a negative view of the sector. On the other hand, the change in the uranium market is positive. When Myriad Uranium secured its property in Niger last year, the uranium company was one of the quick movers. Speculative investors can participate in the project through shares.