01. April 2021 | 05:50 CET
NIO, Defense Metals, Rheinmetall: These shares have catch-up potential
While Germany is facing a new lockdown rather than finally taking flight, the DAX has risen to over 15,000 points. What this shows: The market is already anticipating the post-pandemic upswing. Around the globe, societies are divided into two; those suffering from the pandemic and those that are pandemic winners. The latter sit on high reserves and are just waiting to finally spend their money again, which suggests a clear upswing. With stocks in a doze, this can lead to great opportunities.
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ISIN: US62914V1061 , CA2446331035 , DE0007030009
NIO: Even the Chinese are running out of raw materials
Chinese electric carmaker NIO has often positively surprised the market in recent months. New models scored with their chic design and long range. In addition, as a Chinese automaker, NIO appears to be well-positioned when it comes to the supply of raw materials that are so important for electric cars. First and foremost, these include copper, nickel and rare earths. But recently, there has also been bad news for NIO. Chips for the automotive industry became scarce, forcing NIO to cut production.
For an emerging Company that wants to grow, this is not a good signal. What's more, Chinese automakers are losing an advantage that the market has always granted them: uncomplicated and inexpensive access to raw materials. Simultaneously, established carmakers are increasingly jumping on the e-car bandwagon, so the prospects for NIO and the like are somewhat dampened. The stock lost almost 20% last month. The long-term upward trend is flattening out. Investors can still wait and see on NIO.
Defense Metals: Rare earths in Canada
Meanwhile, the Canadian Company Defense Metals, which is advancing one of the few promising rare earth projects in North America, wants to fight the global shortage of raw materials. The Company recently announced that it had hired experts to evaluate the economics of the Wicheeda property. The area is 1,708 hectares in size and is located about 80 kilometers from the city of Prince George in the Canadian District of British Columbia.
Defense Metals CEO Craig Taylor said in an interview a few weeks ago that the project already received strong support from policymakers because governments have recognized how important the supply of rare earths is for future technology. "Governments in Canada and around the world are committed to ensuring a secure supply chain for rare earths, and Defense Metals is the frontrunner in Canada in terms of successful rare earth metallurgy," Taylor said.
Smaller government grants have also already flowed to Defense Metals. In addition to renewable energy and electric mobility, the Company sees its raw materials in demand from the defense industry. "Already in the past, China has threatened to cut off companies, such as Haliburton or Lockheed Martin, from access to rare earths, showing that China has long used rare earths as a weapon. It is therefore highly likely that the US will respond by securing its own supply of rare earths. For Defense Metals, this is a great opportunity," Taylor said. The stock has since corrected after a rally in February. Anyone who wants to invest in rare earths should take a closer look at the stock now.
Rheinmetall: Poor image, solid figures
The figures of companies like Rheinmetall also show the fact that rare earths are in demand. The armaments Group may have an image problem, but those satisfied with the figures will see positive signals. Although things have recently been weaker at the level of the Group as a whole, the armaments division has made gains. Rheinmetall is benefiting from rising spending on armaments. Germany, in particular, must do more here to meet its obligations to NATO. As last year was dominated by the pandemic, investors are hoping for a recovery in business. The order books are already full.
Although Rheinmetall's stock has suffered slight losses in the past 3 months, it is still on an upward trend on a one-year horizon. The stock could be attractive due to its cyclicality, which is in demand on the market. However, investors cannot expect big jumps. Those who do not categorically rule out small caps can take a closer look at Defense Metals instead. Here, defense and electromobility demand comes together and meets a still very low market capitalization of around EUR 16 million.