April 5th, 2023 | 08:05 CEST
Opportunities for latecomers: Rheinmetall, BYD, Almonty Industries
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
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.
Rheinmetall: How does the market react to the new orders?
Most recently, Rheinmetall and Lockheed Martin signed a memorandum of understanding with the aim of establishing a joint missile-artillery system. At the same time, Denmark and the Netherlands ordered 14 Leopard 2 tanks for Ukraine from Rheinmetall. The Bundeswehr is investing some EUR 770 million in Puma infantry fighting vehicles, which are to be modernized. Just over a year ago, the news reports of the past week would have been enough material for several months. But today, business is booming for arms manufacturers like Rheinmetall. Nevertheless, critical voices are growing: The research portal researchanalyst.com warned a few weeks ago of a sharper correction and saw a slowdown in share price momentum.
"Since the outbreak of the Ukraine war, Rheinmetall AG has established itself as a partner of Western armed forces and should continue to benefit from rising orders from the German Bundeswehr and its NATO partners. However, after a price increase of almost 190%, the first cracks in the chart of the DAX newcomer are showing, so that a stronger correction cannot be ruled out", according to the article of April 6. For investors, it is now exciting to see how the market reacts to new orders. If the mood around the share remains subdued, a correction is still in the air. If the share price reaches a new high, Rheinmetall may even break through the EUR 300 mark. However, the air is getting thinner.
BYD: Opportunities, but also risks
BYD's share price performance shows that shares can also correct despite good business. The battery specialist and car manufacturer is now also represented in Europe and dominates the promising Chinese car market. Many months ago, however, major shareholder Warren Buffet sold his shares and put an end to BYD's highs. On a one-year horizon, the share is currently down just under 5%. Additionally, as BYD faces the challenge of producing its electric cars as sustainably as possible in the future, the stock should be approached with caution.
Almonty Industries: A tungsten giant is being created here
When it comes to implementing modern technology and at the same time sustainably mining and producing the raw and basic materials needed for it, companies like Almonty Industries come into play. Almonty has been mining tungsten for years and has projects in Portugal and Spain, among other places. Tungsten is considered a challenging element by miners. Identifying it and mining it profitably usually requires an experienced team. Almonty is rolling out its expertise on a grand scale and building its Sangdong mine in South Korea. The project is so large that it has the potential to become the largest tungsten mine outside China - with positive ESG cornerstones and within the stable South Korean legal framework.
"We will stand for about 30% of tungsten supply outside China. With China currently even importing tungsten, it shows the important role we play in this market. And there are even more good arguments in favour of Almonty, apart from this one figure: we stand for 100% transparent supply chains and pursue an aggressive ESG concept, which includes Sangdong using 100% renewable energy. We also plan to be completely carbon-neutral and use electric vehicles. This makes Almonty a unique company with a unique market position in tungsten," said Almonty CEO Lewis Black in an interview a few months ago. Since tungsten is urgently needed in the field of armament and for batteries and the energy transition, the project is extremely interesting. On May 10, Lewis Black will present at the 7th International Investment Forum (IIF) at 10.00 am. Interested investors can also ask questions during the presentation.
Those who have had stocks such as Rheinmetall or BYD in their portfolio or watchlist might now consider reallocating - the drop in Rheinmetall is too great, and the outlook for BYD is too uncertain in the midst of the tense geopolitical situation. Titles like Almonty can be a good alternative for diversifying the portfolio. Although the construction of a commodity mine also entails risks, Almonty seems well-positioned with partners such as the German (KfW) Development Bank and the Austrian Plansee Group. It may therefore be worthwhile to analyze the promising smallcap more closely. The IIF on May 10 will provide an excellent opportunity to do so.
Conflict of interest
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