March 4th, 2022 | 11:32 CET
Stagflation! Here is how stocks could react: ThyssenKrupp, Kodiak Copper, BMW
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
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.
ThyssenKrupp: More than a steel group
We can all see that energy prices have risen sharply when at the gas pump or looking at our electricity bills. The long-term consequences have not even been taken into account yet. If Putin's gas disappears as an alternative in the long term, energy prices will continue to rise and drive up inflation. In turn, it could lead to a wage-price spiral given the largely full employment in Western industrialized countries, i.e. further rising prices because employees spend what they earn additionally. With industry unable to recover so significantly after chip shortages and the pandemic in the face of sanctions and the turmoil of war, and high prices here also squeezing margins, governments and central banks face a dilemma. In such a mixed situation, investors should focus on stocks that benefit from the underlying conditions. One of these is ThyssenKrupp.
Because of rising defense budgets, the steel group could land more orders, for example, for submarines from ThyssenKrupp Marine Systems. As the Company's customer base includes not only Germany but also other NATO countries, ThyssenKrupp investors are already rubbing their hands. Although ThyssenKrupp is also likely to suffer from high energy prices, the Company already has plans for the future and could also benefit from the expansion of hydrogen technology. The subsidiary Uhde Chlorine Engineers specializes in electrolyzer plants. However, looking at the share price performance, the steel group's stock is at best in a sideways trend. The recent rise appears of little relevance in the context of the long-term price trend. Whether ThyssenKrupp is a beneficiary of the general conditions remains to be seen.
Kodiak Copper: Newsflow ahead!
Kodiak Copper's share price has recently risen significantly. With MPD, the Company operates a promising copper project in the south of the Canadian district of British Columbia. With a size of 147 sq km, the 100% owned property offers excellent exploration potential. The project is surrounded by several mines producing either copper and silver or copper and molybdenum. Just recently, Kodiak Copper, founded by Great Bear CEO Christopher Taylor and led by ex-Rio Tinto executive Claudia Tornquist as CEO, resumed the drilling program at MPD. A total of 25,000 meters are to be drilled. "2022 promises to be another exciting year as we embark on a major drilling program. It is important to remember that we are still in the early stages of developing the potential of what appears to be a large multi-center porphyry system at MPD. Not only is there significant potential to further expand the Gate zone, but it will be very exciting to apply the successful Gate concept to several other priority drill targets in the concession area as we target additional high-grade discoveries at MPD," Tornquist said.
In addition, results from drilling conducted last year are expected from the laboratory in the coming weeks. Kodiak Copper's MPD copper project is considered promising. Producer Teck Resources holds a block of 4,1 million shares. Given the growing importance of electric mobility and electricity storage, Kodiak Copper is an attractive stock for speculative investors. Given the existing infrastructure around MPD, synergies are also likely to arise in any potential development.
BMW: The risks outweigh the rewards
Companies like BMW have always focused on synergies. For many years, efficiency and synergy took precedence over supply chain security for automakers. Such thinking is outdated given the numerous crises of recent years and the growing uncertainty. Currently, BMW is feeling the pinch of supply problems for cables from Ukraine. The stock has lost most of last year's gains. Investors should be cautious - it currently looks as if BMW will not be able to put its horsepower on the road.
While ThyssenKrupp also has at least one question mark hovering over the ambitious expectations of many speculators due to rising energy costs, uncertainty is part and parcel of a commodity developer like Kodiak Copper and is priced into the valuation. The Company is worth less than EUR 60 million and should benefit from the market's encouragement if its business performance remains positive.
Conflict of interest
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