October 4th, 2021 | 10:06 CEST
NEL, GSP Resource, China Evergrande: How to find the doublers
Table of contents:
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
NEL: From Paul to Saul?
The NEL share is one of the investor favorites of 2020 and the first quarter of 2021. Why? It is where future fantasy and stock market hype came together. NEL focuses on hydrogen storage and transportation. In the past, the Company has already received one or two orders for hydrogen filling stations. Most of these were smaller orders, which hardly bear any relation to NEL's valuation, which is worth billions. But the stock market did not care at the time - the prices rose and rose. And this is precisely where investors should pay attention.
NEL is the best example of a hype stock. When hydrogen was the next big thing, even a small order with a volume of a few million EUR caused a share price explosion. If there are these orders, there is bound to be more, the market thought and cheered NEL's share price up. Between January 2020 and January 2021 alone, NEL more than tripled in value. Since then, the wind has shifted. The major automakers are focusing on electromobility and have turned their backs on fuel cells for passenger cars. Since then, the market has also focused on concrete figures. Orders for NEL are examined much more critically today, and their volume is immediately interpreted in the light of the evaluation. The result: the share has been stuck in a downward trend since the turn of the year. Around EUR 1.30, the value keeps fighting against further decline. NEL is currently no longer a good choice for speculative investors.
GSP Resource: Mini market capitalization + clear strategy
GSP Resource is anything but a hype stock. But that does not mean the share does not have great growth potential. GSP Resource is focused on its Alwin mine, a historic project with the potential to produce copper, gold and silver. What makes Alwin unique is its location: only about 3 km away is the open-pit mine of Teck Resources Highland Valley, a property so extensive, including its tailings pile, that it can be seen from space. GSP Resource's strategy is clear: the Company wants to explore its Alwin mine further to spruce it up for a possible acquisition. With grades of 1.29% copper equivalent over 14.1 meters, this has already worked well in the past. Most recently, GSP Resource went one better with grades of 4.42% copper, 3.5 g/t gold, 92.8 g/t silver and 0.14 ppm rhenium (6.15% copper equivalent) over 4.4 meters.
While GSP Resource's plans are in the early stages, both drill results and the location of the Alwin mine suggest potential. Because GSP's strategy from the outset has been to make the project attractive to potential buyers, the Company also has an attractive cost structure. It is not beating around the bush on ancillary issues. It is solely about making the mine attractive to buyers. The stock has been running sideways for months, but it has also proven suitable for dynamic developments. With a valuation in the low single-digit millions, GSP Resource offers an attractive risk-reward ratio for those who like growth companies and can allocate these stocks with foresight as part of a diversified asset allocation.
China Evergrande: Better go to the casino!
One Company that hardly anyone knew about until a few weeks ago, but which is now attracting gamblers, is China Evergrande. The real estate developer is heavily in debt and has its back to the wall. Most recently, the Company has been unable to make some interest payments, and it still looks as if Beijing does not want to save the huge Company. The stock is riding a roller coaster between hope and fear. Similar cases in the past have been Adler Modemärkte and other insolvency gambles. While these stocks can gain 50% in value within hours, they are unpredictable. Investing in these stocks is like playing musical chairs - the last one to bite the dog.
Instead of betting on insolvency stocks such as China Evergrande, investors should prefer unknown stocks. Here, the company's success can be achieved step by step and independently of tight deadlines or even court dates. The best example of such a company is GSP Resource. Stocks like NEL are a safe bet for gamblers - but only as long as the wave is still breaking. Once the hype is over, speculative investors would be better off surfing elsewhere.
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