11. November 2020 | 14:15 CET
Tesla, Defense Metals, HelloFresh: Who makes a 468% return?
When Tesla advertised its electric sports car around 10 years ago and let journalists drive the chic little vehicle around Germany, the Company was a highly speculative affair. The electric pioneers now have various vehicles on offer and are market leaders in their field. But that does not stop the share from making huge profits: The Tesla share climbed by almost 470% within the past twelve months.
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ISIN: CA2446331035 , US88160R1014 , DE000A161408
Tesla and China are tightening the rare earths market
Another reason for success is the excellent flexibility of the Company. As soon as criticism is voiced or analysts warn of shrinking margins, the team around visionary and Tesla founder, Elon Musk, have an ace up their sleeve. To be competitive on the Chinese market, the engineers adapted the composition of the batteries and thus saved a few more dollars: shareholders and analysts like these tricks. Tesla will also have to be flexible in the future: The Company needs several critical metals for its batteries. These are still highly competitive in the global market. What's more, Tesla's customers have the claim that the raw materials used in the fancy electric cars have been extracted as sustainably as possible. Many projects from Africa or even China fall away with this claim. Producers from North America and Europe are moving into focus.
But the market for critical metals is becoming increasingly tight. Most recently, the investment Company Fortress Value Acquisition Corp, reported the planned takeover of the North American rare earth producer, MP Materials. Next Friday, the shareholders of MP Materials are to decide on the acquisition. MP Materials' flagship project is considered the most critical rare earths producer in North America. At the same time, China has introduced a new law to ensure that economies that make the export of these critical metals difficult, can be sanctioned in the future. Smaller countries, in particular, could collapse under pressure from China.
Defense Metals: Investors will know more by the end of March
The small Canadian Company Defense Metals could benefit from this development. The Company is focused on rare earths and reports 4.9 million tonnes with an average content of 3.02% of light rare earth metals. Inferred resources include 12.1 million tonnes at a grade of 2.9% light rare earths. It was only late last month that Defense Metals raised new capital to justify the economics of its rare earths project through additional measures. The Company plans to report results by the end of March 2021.
Given the low market capitalization of about EUR 6 million and the recent developments in the industry, the Company appears promising. Although small caps carry the risk of increased volatility, a revaluation is in the air, especially after proof of long-term profitability. Such developments can benefit speculative investors.
HelloFresh: When crazy ideas become mainstream
All early shareholders of HelloFresh must also be considered speculative investors. Just one year ago, the concept of food boxes by mail, which bring everything you need to cook at home, was deemed to be interesting, but at best an exciting niche. But then came Corona. The pandemic brought HelloFresh excellent business figures. Now it's time to defend the market shares we have gained. On a one-year horizon, the share price increased by 157%, but recently came down a bit. Even though the share still has a good portion of Corona fantasy slumbering in it, the potential seems to have been exhausted: The share is ambitiously valued, and growth appears limited.
Defense Metals as tomorrow's winner?
In a phase of change, investors should distinguish between short-term and existing trends. Climate change will continue to support interest in electric vehicles. Tesla has also built up a compelling brand image. Although the stock is already expensive, its value remains one of the most promising blue chips. In the small caps segment, investors can focus on suppliers, without whom Companies like Tesla cannot continue their success story. One such supplier could be Defense Metals, the Canadian rare earth Company. Rare earths are urgently needed not only in batteries but also in almost all electrical appliances and in Canada, these rare earths are sustainably mined too. When evaluating future opportunities, it is the prospects that matter.