29. June 2021 | 14:04 CET
SAP, Barrick Gold, GSP Resource: How to invest smartly
Stocks rise and rise. A little more than a year ago, the hope that not everything would be so bad in the end boosted share prices. The end of the pandemic now seems to be near. Linked to this is the hope that the future will bring many new things and that established companies, in particular, will be able to secure a large piece of the pie. But which sectors are exciting? We take a look at two different industries and discuss the opportunities and risks.
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ISIN: SAP SE O.N. | DE0007164600 , BARRICK GOLD CORP. | CA0679011084 , GSP RESOURCE CORP. | CA36249G1090
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
SAP: A sector of the future, but a dull stock
The SAP share is a solid standard stock. At the same time, SAP offers a fair amount of digitalization fantasy: Whether it is warehousing or human resources - SAP has the right software. Since the solutions complement each other in a modular way, companies can grow with SAP solutions. SAP is active worldwide and generates most of its revenue in Europe, closely followed by the USA. The emerging Pacific region accounts for about 15% of sales. More than half of sales still come from software and related consulting. The latter is a regular source of income even after the licenses have been purchased. Since the legal situation or even the technology is constantly changing, investors can expect recurring income. The profitable cloud business is also already an essential pillar for SAP and accounts for around a quarter of revenues.
Just recently, cybersecurity experts again pointed to increased risks associated with cybercrime. The ETF issuer Rize describes investments in IT security as securing the Company's existence and absolutely necessary. In addition to a modern IT infrastructure, the use of solutions from experienced companies also offers protection against criminals. Software in the cloud, in particular, can be updated and armed against threats with less effort. SAP's share price has moved sideways over the last three years and is currently trading around EUR 120. Although the trend is cautiously upward, the share is not a high-flyer.
Barrick Gold: This boredom-buster is not the first choice
The situation is similar for the world's second-largest gold producer, Barrick Gold. The stock has not been getting off the ground for months. After central banks communicated the first signals for higher interest rates, the gold price went into a dive - and dragged Barrick Gold's stock along with it. As an observer, one often has the impression that the Canadian share combines the worst of both worlds: If the gold market is up, the stock lags; if there are setbacks in the gold price, Barrick Gold falls significantly.
Even when earnings were bubbling last year, the market found fault with the value: The basic tenor was that Barrick should have used the high cash flows for investments. Since this failed to happen and a special dividend also was unable to convince investors, the share hardly got off the ground. Barrick is a fundamental investment but also a problem child. Instead of value, a gold mining ETF is more appropriate for cautious investors. A second option is to bet on a junior company with smaller capital investment.
GSP Resource: Commodities? Get your foot in the door with this stock!
One such junior Company is GSP Resource. The Canadians have made it their goal to do a lot with little capital. The Company has a call option on the Alwin project in the southwest of the Canadian District of British Columbia. There, GSP has already successfully drilled for gold, silver and copper. The latter commodity, in particular, has already occurred in samples in significant proportions. 1.29% copper equivalent over a distance of more than 14 meters speaks for itself. In addition, there is a takeover fantasy around GSP Resource: In the immediate vicinity, Teck Resources operates its massive Highland Valley mine. The proximity to this project alone gives rise to latent takeover fantasies around GSP Resource. As the share is currently only worth around EUR 5 million, the stock could be an opportunity for risk-conscious investors.
While many large commodity companies barely pick up steam even when prices are bullish, speculative penny stocks are inherently leveraged to commodity prices due to their valuation. In other words, the stocks function like a kind of warrant, making it possible to invest with only a tiny amount of capital. As the trend towards electric cars and renewable energy continues and copper is needed in this context, the GSP Resource share is an exciting candidate.