NEL, Saturn Oil & Gas, K+S: Who benefits from inflation?

NEL: A good choice amid the hype

The shares of Norwegian hydrogen experts NEL have been a hot potato for months: On a one-year horizon, the stock is up a whopping 160%. But recently, the value has weakened. What is the reason for this? After the hype around hydrogen had reached the last speculation-oriented investor in January, the share went into consolidation. The wait-and-see attitude is further reinforced by the fact that NEL will report figures this Thursday. After its performance so far, the Company may well fail to generate any euphoria at all.

On the stock market, euphoria usually arises whenever the market is looking far into the future, and the sky is full of violins. A dull quarterly report often only ensures that investors are brought back down to earth. It is not for nothing that most analysts currently see NEL as a stock to be held. But that can change again quickly: as soon as the markets pick up speed again, familiar hot stocks like NEL automatically attract more attention. Rising inflation rates also favor inflows of funds into speculative future technology. However, given its already high valuation, NEL is not the preferred inflation pick for investors.

Saturn Oil & Gas: Nimble oil producer on expansion course

Whenever economists take a detailed look at inflation and analyze which prices drive up the cost of living, energy prices are among the most significant price drivers. Both at the gas pump and for heating, prices rise year after year. Now that the Corona pandemic seems to be over on the stock market, and the rise in prices has even got the Bundesbank president talking about inflation, oil producers could be an interesting alternative. The Canadian Company Saturn Oil & Gas has a long track record behind it. Even adverse oil prices did not harm the Company last year. The reason: the management, which has now been working for the Company for several years, hedged half its oil production at prices of CAD 65. In retrospect, a smart move. While oil prices are reaching the hedge level these days, Saturn's agreement is expiring.

At the same time, with the onset of the crisis, the Company announced its intention to focus on acquisitions in the future and to jump-start its previously successful organic growth. Saturn Oil & Gas has not yet announced a closing. At the end of 2020, however, the prominent addition of Jean-Pierre Colin as a strategy consultant caused a stir. Colin has been involved in numerous acquisitions in the commodities sector in the past and is now involved in cleantech. Saturn is also fully committed to sustainability and aims to convince investors with its ESG concept.

Saturn Oil & Gas is a small oil producer with a clear growth strategy and a promising focus on ESG. While the Company cannot be compared to large producers and is disproportionately more speculative, management has now proven over the years that it can also master challenging situations. Since oil traditionally rises in an inflationary environment, Saturn Oil & Gas shares could be a dynamic addition. The share price has recently gained some momentum, and prices above the CAD 0.16 mark could be a starting signal for the share.

K+S: Traditionally, an inflation winner

The K+S share also experienced a jump-start at the end of last year. The fertilizer producer sold its weakening US business and the share price rose dynamically. Since then, however, the share has been in "dull mode." Most recently, the fertilizer producer stalked towards the EUR 10 mark.

In the long term, K+S benefits from demographic factors and the inflation of agricultural raw materials - the more yields the fields have to produce, the more important adequate fertilization is. The share was already considered a safe bank in an inflationary environment more than ten years ago. A look at the long-term chart indicates where the share could be headed.

While K+S has not yet been kissed awake and traditionally has a relatively sluggish business, new developments in small caps, such as Saturn Oil & Gas, usually have a more immediate impact. As a hedge against inflation in the portfolio, the Canadian small-cap with its convincing track record can play a crucial role in the portfolio even for smaller amounts.