April 20th, 2022 | 14:01 CEST
Rheinmetall, thyssenkrupp, Defense Metals: The scarce metals matter!
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Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Rheinmetall - Medium-term investments in peace
The technology and armaments company Rheinmetall continues to be in focus. After an initial move of 100% in the week after the start of the war, the stock just kept climbing. In the meantime, several analysts are already getting carried away with high price targets. These include UBS with EUR 187, the German bank with EUR 190 and Berenberg with EUR 215. There are 12 positive ratings and not a single negative study. Yesterday, Rheinmetall peaked at EUR 217.70, representing a 12-month gain of 134%.
Where do we go from here? The fact remains that Rheinmetall, in particular, is expected to collect large parts of the EUR 100 billion special assets of the German armed forces. But then there are the orders from the allies, who also want to bring their equipment up to date. Whether or not Leopard main battle tanks will be delivered to Ukraine is a political issue and certainly not an easy decision for Germany.
For Rheinmetall, however, the origin of the orders does not really matter. The disrupted supply chains and the high procurement prices for metals could be more of a brake. However, we trust the Company to have a clean price calculation. Anyone ordering a tank today will probably pay 50% more than a few years ago. The fact remains that Europe's military defense readiness is running through Rheinmetall's books on a pro-rata basis. That makes the stock still worth holding. However, since a surprise peace treaty could be signed in Ukraine at any time, they should also keep the security freeze in place. Currently, the chart offers an important line at EUR 207. There will probably not be a consolidation before that.
Defense Metals - Dangerous handling of rare metals worldwide
Russia's war of aggression on its neighbor Ukraine makes it transparent that availability in rare metals and important materials must be available at all times. External dependencies, as in the case of rare earths, must be reduced in the medium term or, at best, even eliminated. Unfortunately, this is not quite so simple in the case of rare earths since deposits are thin on the ground. However, the North American governments have now declared this deficit a top priority for the leading producer, China. Even today, the USA exports its 15% share of the world's rare earth production to China for further processing. Although much of this is recovered through bilateral contracts, the agreement stands and falls with the political climate. And based on recent experience, this can change very quickly.
From this perspective, one of the few promising rare earth projects outside China is emerging in Canada. British Columbia-based exploration company Defense Metals is focused on advancing the Wicheeda Rare Earth Project, which covers some 2,008 hectares. A major advantage of the REE project is the future production of a saleable, high-grade flotation concentrate. The Company's president Luisa Moreno is an expert in materials management and a leading rare earths analyst. She already presented the Company's prospects as outstanding at the last IIF forum, but our world was still characterized by peace at that time.
In early April, Defense Metals completed a private placement of CAD 4.558 million and issued shares at CAD 0.26 plus a 2-year warrant based on CAD 0.40. The capital increase was well received, with Defense Metals' (DEFN) share price rising by a good 10% since the measure. In the current environment, Defense Metals is a medium-term super pick!
thyssenkrupp - Still trouble with the steel division
The deep-rooted problems in the thyssenkrupp Group are becoming transparent again these days. Although the new divisions are dealing with future technologies such as hydrogen, the difficulties in the steel division are again increasing. The high energy costs are causing even more problems for Germany, which is already a difficult location.
At the beginning of April, former SPD chairman and former German Economics Minister Sigmar Gabriel took over as Chairman of the Supervisory Board of the steel division. This well-known name may provide impetus. There would also be plenty of imagination in the TKMS marine division, where there are hopes of some additional government orders. To handle this in the future, the takeover of the insolvent MV Shipyards Group might even be a lucrative opportunity. Here, the medium-term glasses are now required, but currently, the problems in the steel sector are rather striking.
After an interim rally in the TKA share to almost EUR 11 in November and January, the value had to experience a true sell-off again in just 6 weeks. The price plunged to a new 12-month low of EUR 6.67 at the beginning of April. In the current recovery movement, a recapture of the EUR 8 mark is urgently required to generate a medium-term buy signal. At the moment, however, there are probably some low-price speculators who are boldly entering the market here.
The volatile environment remains the setup for the coming weeks. Defense stocks like Rheinmetall are getting a lot of attention but are already well run. thyssenkrupp could offer an interesting entry. Defense Metals continues to work consistently on the next rare earth production for North America - an interesting strategic theme for risk-conscious investors.
Conflict of interest
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