November 1st, 2021 | 10:29 CET
Shell, Sierra Grande Minerals, K+S: 4.1% inflation - here is how investors counteract it
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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.
Shell: Good, but there are better things
So far, ECB chief Christine Lagarde and co. are assuming that inflation is only temporary. Still sputtering supply chains and lower energy supplies may have accounted for this temporary effect, optimists say. But inflation can feed on itself. As people bring forward purchases in the face of rising prices, prices keep rising. Such an effect is already being felt in real estate or even services, such as trades. For oil companies, such as Shell, the current inflationary episode is a good market environment - after all, margins are rising.
According to many experts, such as Deutsche Bank's chief investment strategist Ulrich Stephan, the shares of Shell and other oil multinationals are still moderately valued - especially in Europe. Shell gained, nevertheless within the past three months around 20%. The Company also invests in renewable energy and outwardly presents itself as decidedly "green". That is also due to a judgment that the Company had to accept some time ago, which forced it to become climate-neutral faster than planned. If you look at the chart over the long term, Shell also still has potential. However, investors should not ignore the political headwinds facing fossil fuels. For smaller companies in the oil sector, there may still be greater opportunities.
Sierra Grande Minerals: 3 projects, less than EUR 5 million valuation
A small company with multiple opportunities is Sierra Grande Minerals. However, this is not oil, but gold, silver, molybdenum and copper in Nevada. The Company is developing three projects within the Getchel-Comstock-Trend and Walker Lane commodity belts. Not far away is also the well-known Carlin trend and numerous mines around gold and copper. Sierra Grande develops all of its projects at an early stage. That means that crucial preliminary work can be done already from small investments to get indications of raw material deposits and possibly even their economic extraction. Currently, the shares of Sierra Grande Minerals are valued at less than EUR 5 million - so the market's advance praise for the three projects is relatively low.
Sierra Grande Minerals has already announced results from more than 500 geochemical soil samples showing copper, molybdenum, and silver showings on the B&C Springs property. The next steps include further exploration work. The path Sierra Grande is on is clear: the clearer the potential of the properties becomes, the more likely the share price is to rise. While the current early stage is highly speculative from an investor's perspective, successful exploration would quickly lift the share into other spheres. A crisis development around inflation or distortions in the financial system could also provide a tailwind for the share. The stock is a highly speculative insurance policy against crises, which experienced investors can add to their portfolios.
K+S: Setbacks remain possible
The K+S share is also running like clockwork. The fertilizer specialist has always been a good choice when prices rise. Even during the inflation scare after the great financial crisis, K+S was one of the high flyers. After that, things went downhill for the Company: The salt business in the USA paralyzed the Company. Only the sale last year gave K+S room to maneuver. In the meantime, the financial situation has eased, and the inflationary market environment is playing into the Company's cards. However, investors should remember that the share price has already risen sharply and that K+S has anything but a solid balance sheet. Setbacks are possible at any time.
Investors who want to profit from the current situation with blue chips should prefer oil companies, such as Shell. In the case of K+S, there are still some question marks. In addition, agricultural commodities are not yet a major topic on the markets. Those ready for investments in second-line stocks can also take a closer look at Sierra Grande Minerals. Here is the chance to accompany three raw material projects from the beginning - with all opportunities and risks.
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