March 14th, 2022 | 10:17 CET
Mercedes-Benz Group, Phoenix Copper, JinkoSolar: Learning from history
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"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
Mercedes-Benz: What is next?
Mercedes-Benz has recently suffered from the Ukraine war. Car manufacturers get wiring harnesses from Ukraine, and the supply has collapsed. While three years ago, such mundane things as cables were not a criterion for distinguishing carmakers from an investor's point of view, today details matter. Who has how many suppliers? Who might have an ace up their sleeve in the global distribution battle? Answering these questions in terms of each basic upstream product can be challenging for stock pickers. Who knows whether Mercedes or Volkswagen has positioned itself more securely?
With these questions currently hanging over many companies, the market has punished stockpickers across the board. Opportunities are emerging from this. Looking at Mercedes-Benz, investors will still find a respected premium brand that plans to electrify its model lineup by 2030. In addition, there is an attractive dividend yield that was already hovering around 5% before the share price losses. Although dividends are not set in stone in times of crisis, and energy costs, in particular, are likely to affect Mercedes-Benz as an industrial company, the Group has everything it needs to be successful in the long term. From a chart perspective, the stock has also currently stopped at an interesting mark. However, the overall market will decide where the share is headed.
Phoenix Copper: Sustainable copper for the world
While stocks such as Mercedes-Benz Group are justifiably suffering from economic security, the connections at Phoenix Copper are less clear. The Company is on the verge of bringing its copper project in the US state of Idaho into production. The goal is to get going before the end of 2022. In the first year of production, the Company aims to generate a whopping USD 43 million in cash - with a current market capitalization of only about EUR 70 million. The project has electricity and water and is accessible by road all year round. There are further raw material projects around copper and cobalt in the surrounding area. Phoenix Copper points out that 76% of Idaho's electricity comes from renewable sources. The state also has an advantage over other US states regarding permitting procedures, as partial permits are processed in parallel rather than step-by-step, as is common elsewhere. Because of this framework, Idaho is considered the fastest-growing US state.
The flagship project Empire Open Pit, for which there is already a preliminary feasibility analysis including detailed key economic data, is expected to score with its robust figures and environmental friendliness. It has been designed to be sustainable from the outset. Given the global shortage of raw materials and the growing demand for new technologies, copper will remain in demand in the future. The trend towards redundant supply chains and sustainability should benefit Idaho-based Phoenix Copper. Currently, the stock has not yet jumped. However, as a budding commodity producer, the value should be in a better position than many industrial companies suffering from supply problems today.
JinkoSolar: Risks lie dormant in China
JinkoSolar also has an effective remedy for supply problems - the Chinese Group has been involved in the Chinese raw materials strategy for years, based on the motto "it is better to have than to need". But even if JinkoSolar is likely to benefit from the accelerated energy transition in the wake of the Ukraine war, risks remain for the Chinese too. Supply chains are increasingly being evaluated in terms of their sustainability. China could also face geopolitical headwinds. The approach toward Hong Kong and the threats against Taiwan harbor conflict potential. While Russia is easier to boycott than China, investors should not ignore political risks around JinkoSolar. The fact that the Company is not clearly on the winning side is also shown by the share price, trending volatilely sideways for a year. Although the Company convinces with quality and competitive prices, the share is not a sure-fire winner despite the energy turnaround.
While many industrial companies are struggling with supply problems and energy costs are slowly but surely becoming a threat, there are also political risks for price breakers from Asia that are used to success. If you want to learn from the weighting and consider the crash after the pandemic, you could first invest in those goods that are also in short supply. These are raw materials and intermediate products. Secure legal frameworks in Western industrialized countries and established ESG strategies are further arguments for stocks, such as Phoenix Copper. Even though the Company has to be considered speculative given its early stage, the framework looks quite good.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
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