Close menu




June 22nd, 2022 | 11:22 CEST

New opportunities in the supercycle - Glencore, Defense Metals, NIO

  • Electromobility
  • RareEarths
Photo credits: pixabay.com

Concerns about a further sharp rise in inflation sent the stock markets into a tailspin in recent weeks. The main reason for the enormous inflation was exploding energy and commodity prices. In addition to crude oil and natural gas, metals important for industry, such as copper and rare earth metals, are currently correcting. This should again offer an opportunity to participate in the supercycles in the long term.

time to read: 4 minutes | Author: Stefan Feulner
ISIN: GLENCORE PLC DL -_01 | JE00B4T3BW64 , DEFENSE METALS CORP. | CA2446331035 , NIO INC.A S.ADR DL-_00025 | US62914V1061

Table of contents:


    Surge in profits and a flood of recommendations

    Many companies are groaning under the high energy and commodity prices. For Glencore, the world's largest commodity trading group, however, the price explosion is leading to a significant jump in profits. The Swiss company is already expecting an adjusted operating profit of more than USD 3.2 million in the first six months of the year, which would mean that it has already more than recouped its planned annual profit in the first half of the year. Originally, the full-year 2022 EBIT guidance was between USD 2.2 billion and USD 3.2 billion for the trading business.

    The strong forecasts prompted several analyst firms to shower the Company with buy recommendations. For example, US investment bank Goldman Sachs raised its target price from GBp 710 to GBp 745 on the back of the solid interim report and reiterated its buy rating, as did major Swiss bank UBS. They continue to see a target of GBp 560. US bank JPMorgan even raised its price target for the Zug-based company from GBp 630 to GBp 650 and maintained its "overweight" rating. The commodities group presented a solid interim report, wrote analyst Dominic O'Kane and sees Glencore as his "top pick" in the mining sector.

    Even though the Company itself expects the situation to calm down in a report from the summer, the stock should remain in demand after a brief consolidation. The inclusion in the STOXX Europe 50 should also provide a tailwind. There Glencore replaces the recently weakening sporting goods manufacturer Adidas.

    Defense Metals - Concerns about dependence on China

    Since Russia invaded Ukraine, Western politicians have been trying to reduce dependence on Russian oil and natural gas. It is to be achieved by accelerating the development of renewable energies. Here, however, the danger of dependence, this time on China, is already lurking. China has a virtual monopoly on the mining and processing of critical raw materials such as rare earth metals. These are needed, for example, for the production of wind turbines, solar panels, batteries and electric cars. With a new law, the EU Commission wants to secure Europe's supply of raw materials needed for the energy transition and the digital transformation. In initial key points, EU Internal Market Commissioner Thierry Breton warns against "Europe's excessive dependence on critical materials, which often come from only one country," the "Handelsblatt" reported.

    However, alternatives are scarce in the Western world. As outlined in a report, besides Australian mines in the US, there has been only one rare earth mine worth mentioning in the recent past. The mine in Mountain Pass, California, owned by publicly traded MP Materials, produced 15% of global production in 2020, according to the US Geological Survey.

    The Wicheeda project, acquired outright by publicly-traded Defense Metals since the beginning of the year, has strong metallurgical similarities to the only profitable mine in the Western Hemisphere to date, the Mountain Pass mine. It has the potential to become one of the most significant global deposits of rare earth metals, according to the Preliminary Economic Assessment (PEA).

    After Defense Metals staked additional claims, the deposit totals 4,244 hectares and is equipped with world-class infrastructure. For 2021, a PEA indicated an after-tax net present value (discounted at 8%) of USD 517 million at an internal rate of return of 18%.

    Recently, an update on ongoing diamond drilling was released. The campaign began in the northern resource area, with the first two resource delineation holes nearing completion, totalling approximately 615m. According to the Company's management, Defense Metals plans to drill diamond holes up to 5,000m in length. After a stock price correction of over 40% since last year, positive drilling results could lead to a rebound. With the supply shortage of rare earth metals in the Western world, the Wicheeda project offers a prime opportunity for long-term share price gains.

    NIO - With relative strength

    After the sharp price losses of recent months, the worst of the suffering seems to be over for shareholders of electric car maker NIO. After the stock corrected from its high at USD 66.99 to USD 11.67 in mid-May, where it formed a possible double bottom, the share has since rallied to USD 20.77. In addition to buy signals in MACD and RSI, there was also a tailwind from the fundamental side.

    The new ES7 off-road vehicle was recently presented. The sporty SUV is expected to put the competitor Tesla and its Model X and Model Y under pressure. Depending on the battery size, the ES7 manages a total of 485km, 620km or 930km and is expected to cost just under USD 70,000 for the basic variant. NIO's obstacle detection software is also said to detect objects as close as 687m, while Tesla can only detect obstacles from 229m.

    In addition, Deutsche Bank is optimistic and continues to see NIO as a buy candidate with a price target of USD 45. Analyst Edison Yu remains confident that NIO will embark on the most important product cycle in the Company's history. In addition, volumes have been under pressure in recent quarters due to operational bottlenecks and COVID lockouts. However, the Company's shipments are on track to increase from 7,000 per month in May to 25,000 by the end of the year. That should shift the focus away from supply bottlenecks and toward a robust product supercycle.


    After solid gains in recent months, various commodities needed for renewables are correcting, in addition to oil and natural gas. Thus, companies such as Glencore and Defense Metals present anticyclical entry opportunities after corrections. NIO has already turned and sent the first buy signals.


    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.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

    The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.


    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author



    Related comments:

    Commented by André Will-Laudien on September 30th, 2022 | 12:36 CEST

    Higher, faster, further: BYD, Infinity Stone, Porsche, Varta - The energy transition stock portfolio is wanted!

    • Mining
    • Gold
    • Electromobility
    • GreenTech

    The words "energy turnaround" are used a lot in public. The majority understand it to mean the use of GreenTech to generate energy while avoiding dangerous climate gases. Unfortunately, the leaks from the Nord Stream 2 pipeline, which is not in operation, are leaking the amount of gas into the atmosphere every day that the state of Denmark consumes in an entire week. This makes us painfully aware of how strongly warlike actions counteract efforts to save the climate. On the stock market, it is important to turn our gaze away from current events and toward a more peaceful future, where good ideas for sustainable change will also be rewarded. Which stocks belong in the portfolio?

    Read

    Commented by Juliane Zielonka on September 29th, 2022 | 10:57 CEST

    Barsele Minerals, K+S, BYD - Sweden as a crisis winner?

    • Mining
    • Gold
    • fertilizer
    • Electromobility

    Due to the explosions in the Baltic Sea pipelines Nord Stream 1 and 2, a switch to other energy sources is inevitable, especially for German industry. Fertilizer producer K+S, based in Kassel, is affected by this. The situation is different with Barsele Minerals. The Canadian company is exploring large gold areas in sunny Sweden and plans to mine up to 3.5 million ounces of the precious metal in the future. Electric car and battery manufacturer BYD, on the other hand, has sufficient resources in its home country of China and is preparing to make the leap into the European market. Find out here which shares are now defying the crisis.

    Read

    Commented by Fabian Lorenz on September 28th, 2022 | 11:22 CEST

    Time for bargain hunters? Plug Power, Varta and Pathfinder Ventures

    • Investments
    • Camping
    • RV
    • Electromobility

    Growth stocks are currently under particular pressure. But this can also create opportunities for bargain hunters. Perhaps in the case of Varta? The share has crashed sharply after a profit warning. Now, the first analyst has upgraded the share from "sell" to "buy". But even his reasoning does not sound like a new growth story. Plug Power also tends to live on the hope of growth. While the new production facility is technically a milestone, it needs more. In contrast, things are going well at Pathfinder Ventures. The still unknown tourism company is profiting from the camping boom in North America, and its valuation is anything but expensive.

    Read