15. July 2021 | 11:56 CET
SAP, White Metal Resources, Nokia - Markets facing a decision
The global economy is celebrating a turnaround, and corporate profits are bubbling. Consumer spending is jumping due to austerity during the Corona lockdowns. In addition, growth is fueled by billions of dollars in infrastructure projects from policymakers. Golden times for the stock markets, if it were not for concerns about rampant inflation. According to the Labor Department, consumer prices in the USA rose by 0.9% to 5.4% in June. It is the most significant price increase since August 2008. The FED is being challenged.
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ISIN: SAP SE O.N. | DE0007164600 , WHITE METAL RES | CA9640461062 , NOKIA OYJ EO-_06 | FI0009000681
"[...] 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
Framework data is right
Once again, Federal Reserve Chairman Jerome Powell appears at a hearing in the US Congress to explain the Federal Reserve's monetary policy. The main topic is almost certainly the fear of rising inflation. So far, Powell has consistently emphasized that price pressures are temporary and that monetary policy will remain loose for the foreseeable future.
If inflation in the US turns out to be stronger and remains so for longer, an earlier than planned exit from bond purchases is probably inevitable. Still, central banks have their backs to the wall. If the interest rate hikes are too steep, there is a risk that the economic engine will stall. Added to this is the historically high level of government debt, which totals almost USD 300 trillion. The financing of the energy turnaround does not allow for extremely high interest rates and yields.
Rising inflation with two smaller interest rate hikes until 2023 and a growing and remaining rate of price increases would be the basis for a long-term rising gold price. In addition to buying physical gold, an investment in gold producers and exploration companies is a good idea. These have corrected disproportionately since the high of the gold price and offer an attractive risk-reward ratio in the long term.
One buys a well-diversified portfolio at White Metal Resources. In addition to gold and silver projects, the project generator also invests in promising copper properties in cooperation with suitable partners. Due to its conductivity, copper is considered the "metal of the energy transition" and promises high value increases in the coming years due to growing demand.
The geographic focus of White Metal Resources is on the Canadian province of Ontario. Here, the focus is on the 1,968 hectare Tower Stock Gold Project, in which the Company holds an option to acquire 100%. A summer drill program of 3,000m has now commenced and will last four to five weeks. The drill program will also focus on unexplored areas of the Bench Zone where drilling is spaced 75 to 100 meters apart in places, and as a result, a significant amount of detailed drilling will be required.
In addition to Canada, White Metal Resources is investing in Namibia. If historical drill results are anything to go by, the Okohongo copper-silver project offers enormous potential. Here, too, the Company is currently carrying out an exploration program along the resource-rich, sediment-bedded copper horizon, more than 7 km in size, which extends north of the deposit. Samples of up to 31.8% copper, 65 g/t silver and 20% lead have been collected. The Company now believes that Okohongo's mineralization to date extends much further than suspected.
With a market value of just EUR 4.5 million, the intrinsic value of the projects is already likely to exceed the current market capitalization. In addition, the Company's management plans to steadily expand the portfolio with promising projects.
The turnaround is underway
Nokia, once the world's largest cell phone manufacturer, has had difficult years. Thanks to enormous cost-cutting measures - in March, the Finnish Company decided to cut 10,000 jobs to permanently reduce costs by EUR 600 million by the end of 2023 - and better business, there is light at the end of the tunnel. Due to this, an increase in the annual forecast was now considered. Initially, Nokia was looking for net sales adjusted for currency fluctuations of between EUR 20.6 billion and EUR 21.8 billion and an operating margin of 7% to 10%. JP Morgan upgraded the Finn's stock to "overweight" from "neutral" after the full-year forecast increase was announced and raised its price target to EUR 6.50 from EUR 3.80.
Investment house Morgan Stanley had already taken action on SAP before the figures. The US analysts kept their rating at "overweight". However, the price target for the Walldorf-based Company was raised from EUR 128 to EUR 136. From a chart perspective, the gap opened last fall by the disappointing quarterly figures has been closed. The next resistance now lies at EUR 130.
The central banks are in a tight spot. If they raise interest rates too much, growth will be slowed down. Thus, if at all, only moderate interest rate hikes are likely in the near future. Gold and equities are therefore ideally positioned for further increases in prices. Gold mining stocks such as White Metal Resources offer leverage to the gold price but are more speculative. Nokia's turnaround seems to be accelerating.