August 9th, 2022 | 10:22 CEST
Split fantasy: Amazon, Alphabet, Viva Gold, Tesla - Shares with top prospects!
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"[...] We can make a big increase in value with little capital. [...]" David Mason, Managing Director, CEO, NewPeak Metals Ltd.
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.
Gold and equities defy the weak euro and inflation
The European single currency has undergone its greatest devaluation in over 10 years. It has lost a full 20% against the Swiss franc since March 2018 and a whopping 25% against the US dollar over the same period. Gold, on the other hand, has gained over 40% in the last 5 years. So those who have held gold for several years turn out to be clear winners against the low-interest rate environment of the past few years. However, those who had kept their Euros in their bank accounts experienced a real negative interest rate for years and recently even had to accept inflation rates of 8%, broken down to daily consumer goods of more than 25%. Stocks in Germany barely rose from January 2018 until today, but the S&P 500 index still performed by more than 60%. So experience shows that investing in precious metals and international diversification to equities and real estate promises the greatest long-term value preservation.
Amazon and Alphabet - Great performance after the split
Blockbuster stocks listed on NASDAQ with market capitalizations in the trillions are also always in focus. These include Apple, Amazon, Alphabet, Microsoft and Tesla. All stocks have enjoyed meteoric share price growth over the past 5 years, as they are considered the undisputed market leaders in their segment.
Apple's shares have been split five times since 1987. The number of shares has reached 16.070 billion after the last distribution of bonus shares. At a share price of around USD 157, the Company is worth USD 2.52 trillion today. Due to the weak EUR development since the beginning of the year, Apple shares are up 31% on a 12-month basis and were also recently able to iron out all losses from the Russia discount in March.
The two most recent splits concern Amazon and Alphabet. Both companies had increased their number of shares by 20 times. As a result, the heavy USD 2500 stocks on the stock market have now become stocks trading in the EUR 100 range. Shooting star Amazon was quoted at EUR 115 on the day of the split and swung up to EUR 139 in the last few days. On a 12-month view, the value is now only 2% in the red. Since the allocation of the new shares, it has gained a good 20%. In the case of Alphabet, the split took place only 2 weeks ago. This much can already be said: 10% plus in one week points in the right direction. Keep an eye on the big NASDAQ stocks. The largest performance contribution should be generated by these growth stocks.
Viva Gold - In the Nevada desert
The current price of gold should not obscure the fact that for centuries gold, in addition to value stability, has also contained an insurance component, especially in politically difficult phases. In times of war, such as now, gold becomes the focus of stability-oriented investors. Even though Russia, for example, is currently tending to be one of the sellers of gold to finance its war of aggression against Ukraine, many other market participants are happy to take these additional physical trading volumes into their portfolios. Real gold is thus always in demand. Significant trading locations for the metal are London, Singapore and Switzerland.
Among the medium-term investors, however, some do not expect significant rises in the precious metal for a few years and therefore tend to buy into a promising property that will only increase in value through corresponding exploration successes. In 2017, Canadian explorer Viva Gold secured a 4,250-hectare property in Nevada with a prospecting license. It lies within the historically well-known Walker Lane, where Kinross, Coeur Mining, Augusta and Centerra operate. There have also been spectacular acquisitions in this district in recent years, for example, with the Bullfrog Mine.
The well-known mining giants such as Barrick, Newmont and Agnico-Eagle are regularly on the lookout for good mining zones. Nevada has been rated third in the world by the Fraser Institute as a mining-friendly US state, which increases the chances of carrying out rapid mine expansions. With an estimated and suspected 600,000 ounces, Viva Gold's Tonopah project is not far from Kinross, with a quarter of a million ounces being mined here each year. The major would need to raise just shy of CAD 8 million to put Viva Gold's 5-year exploration work on its books. That is just the equivalent of 3,500 ounces of gold. The speculative gold investor is already picking up a few pieces here.
Tesla - From one to three
The Tesla share has split only once, in August 2020. For investors, the timing could not be better because, as a result, there was a hail of positive analyst comments and the price targets drove speculation to unimagined heights. The share reached its all-time high a good year later in November 2021, at around USD 1,243.
In the same period, Tesla's quarterly earnings rose from USD 0.60 to USD 2.54 per share, representing a fourfold increase. But the numbers were not just operational, as there were also large credits from trading climate allowances in those quarters. In the current year, Tesla may be able to keep its operating beat very high, but losses from crypto speculation and CEO Elon Musk's failed Twitter acquisition are still weighing. The stock began to correct more sharply in the first quarter of 2022, losing a full 50% to USD 620 by May 2022. From this point, however, the value was able to gain another 50% to just under USD 950. However, the former high was not reached again.
Now Tesla has announced that, in addition to 2 million vehicles produced in 2022, it will also carry out a stock split again. For one old share, two more shares are to be bought on August 25. At the annual shareholder meeting "Cyber Roundup" last week, Elon Musk reiterated the positive development of Tesla's driver assistance system and the construction of 10 to 12 more gigafactories. A renewed declaration of war from Austin/Texas to the competition thus thunders through the stock market halls. Despite all the opportunities, Tesla is highly volatile and only suitable for investors with strong nerves. The price-earnings ratio, based on expected 2022 earnings, is still over 100. Therefore, beware, the Tesla story relies on clear market leadership, but German engineering firms have long since stopped sleeping.
Investing in stocks depends on many determinants. Interest rates, inflation, the economy, and geopolitics exert a strong influence on valuation and investment performance. The high valuations of US stocks have recently eased somewhat, but new investor money is already flowing into the favorite stocks of yesteryear. Will it start again from this level? Probably only if the widely expected recession does not materialize.
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