October 19th, 2021 | 10:46 CEST
Royal Dutch Shell, MAS Gold, Barrick Gold: Remedies for inflation and crisis
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Royal Dutch Shell: Oil price profiteer with green credentials
Despite the current sharp rise in share prices, the markets are facing turbulent times ahead. The much-heralded post-Corona boom currently feels different than expected. Life is becoming more expensive, and many companies are unable to meet demand. The result: production cutbacks in the auto sector, postponed orders in the SME sector. The term stagflation has long been making the rounds. This combination of a struggling economy and rising prices is poison for the markets and also for companies. Whether it will come to that? Uncertain! What is clear, however, is that investors can hedge against the situation. One possible hedge is with shares in oil companies, such as Royal Dutch Shell.
The group's stock has risen by around 20% in the past month alone. Given that oil products account for about 70% of sales, this is hardly surprising. A few months ago, Shell caused a stir with a defeat in court - a court in The Hague ordered the Company to implement its climate protection measures even faster. That is one of the reasons why Shell has recently invested more in its chemicals division and wind power projects. The Company is planning a wind farm off the coast of New Jersey with a total capacity of around 1.5 GW. This "green coat" is doing the Company some good. At the same time, the rising oil price is pushing up the share price. The stock is a potential investment in the context of rising inflation. However, there are better alternatives in the oil and gas sector, especially among smaller companies.
MAS Gold: Small value with surprise potential
If you want to reflect rising inflation in your portfolio, you either bet on intact trends, as in the case of Royal Dutch Shell, or you prefer inflation winners that the market has not yet recognized. For the latter scenario, MAS Gold's stock could soon catch the market's attention. MAS Gold operates several projects in the La Ronge Gold Belt in the Canadian province of Saskatchewan. According to the Company, the geology there is similar to known gold mining areas in West Africa. MAS Gold is pursuing a hub-and-spoke model and plans to connect its smaller projects to a central processing plant.
MAS Gold's central commodity is the best known of all precious metals, but the Company's geologists are also looking for silver and copper. The Company plans to soon report 1 million ounces of gold as its first milestone. Since MAS Gold was in a legal dispute with a former joint venture partner until a few months ago, the stock with its low double-digit market capitalization has not taken off yet. However, if the good prospects are joined by tangible drill results and the market recognizes a positive development, MAS Gold could leverage gold prices and inflation trends.
Barrick Gold: Where is the fantasy?
Especially when compared to industry heavyweights, like Barrick Gold, smaller stocks can have an advantage. Since these smaller stocks offer greater leverage on the gold price, private investors also have to invest less capital, similar to an insurance premium. It is a different story with stocks like Barrick Gold. Here, the price is not getting off the ground - on a one-year horizon it is even down 30.7%. According to market observers, the reason is the lack of imagination surrounding Barrick Gold. If the gold price rises, the Company earns money but hardly finds opportunities to invest this capital profitably. Last year, Barrick even sheepishly distributed a special dividend. Those looking for growth should prefer other stocks. However, if gold rises rapidly, Barrick's share should also benefit.
Those who want to hedge against rising inflation will find opportunities in the oil market. If inflation is accompanied by distortions of the financial system or wrong decisions of the central banks, the hour of the crisis currency gold could strike. In such a case, small stocks such as MAS Gold would have more catch-up potential than Barrick Gold, for example.
Conflict of interest
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