June 13th, 2022 | 10:40 CEST
Stocks on the brink - here is how you can trade: thyssenkrupp, Nevada Copper, K+S
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"[...] If we pursue our goals conscientiously, the market will adjust its valuation accordingly, I am sure. Often, all it takes is a trigger. [...]" Ryan McDermott, CEO, Phoenix Copper
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: A lot has happened here
Düsseldorf-based thyssenkrupp is considered to be struggling these days. The negative economic outlook and the imminent interest rate turnaround, also in Europe, are causing the share price to tumble. But it is worth looking at the Company through the eyes of a development that began years ago. In recent years, thyssenkrupp has divested numerous subsidiaries to streamline its operations. Among other things, the Italian stainless steel plant AST was sold, as well as the mining sector, the infrastructure division and also the carbon parts business. Instead, thyssenkrupp focused on hydrogen and sees great growth potential in the electrolyzer business.
In recent quarters the Company has already increased its sales and sold higher volumes. With the hydrogen business, thyssenkrupp also has a real hopeful in its portfolio. Although some observers see the stock falling back into a downtrend, investors should not forget the successes of recent years. Today thyssenkrupp is less susceptible to crises than in the past. However, risks remain.
Nevada Copper: Is the market exaggerating downward?
The market has also priced in a fair amount of risk for Nevada Copper. The copper producer in the US state of the same name recently had to report "operational challenges" at its Pumpkin Hollow underground project. What happened? A weak rock structure is delaying the mining of rock in a specific area (East South Zone) of the mine until August. As the Company has acute financing needs, a new round of financing is required. The Company is working to secure this funding to bridge the delay. Work is expected to continue as planned on other high-grade areas of the mine.
Royal Bank of Canada analysts reacted to the events and lowered their price target to CAD 0.50. The analysts now only rate the share as "Underperform" instead of "Outperform". The share most recently fell to below CAD 0.40. As usual, the market is also exaggerating to the downside. The value is a hot potato because of the financing risks. Investors must decide, depending on their individual situation, whether they want to continue to hold the value or not. However, if a solution can be found with the existing financing partners, which includes KfW and some anchor shareholders who only bought into the Company a few months ago, the mood surrounding Nevada Copper could turn around.
K+S: Comeback instead of bankruptcy vulture
The K+S share shows that after a cleansing thunderstorm, the sun shines again. For a long time, the fertilizer specialist was considered to be in trouble: a high debt ratio, strong competition and little hope weighed on the share price. Some investors even thought a bankruptcy vulture was hovering over the Company's headquarters in Kassel. But rising commodity prices have breathed new life into K+S. Since 2020, the share price has almost tripled. New fertilizers are expected to lead K+S into a golden future. The Company has thus definitely jumped off the brink of death - but the business remains cyclical.
Those who bought K+S in 2020 at single-digit prices are now sitting on rich profits that are actually only possible with small caps. But very few investors will have dared to invest in K+S in 2020. In order to courageously reach into falling knives, it is crucial to assess a company's challenges accurately - and to hold one's own opinion for a longer period of time. Those who go against the market, as is currently the case with buyers of Nevada Copper, sometimes need a lot of staying power, but they can also be rewarded for it. However, investors should not invest on the principle of hope - the more complex the situation, the more thorough the analysis of shares should be.
Conflict of interest
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