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November 17th, 2022 | 11:20 CET

The big catch-up - China Big Tech: Alibaba, Deutsche Bank, TUI and Desert Gold turn up the heat!

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Investors increasingly look at the big losers in heavily sold markets because the size of the markdowns identifies potential for the future. Often shares fall because of the general market weakness, but sometimes the operating business also weighs heavy. At the end of the year, there is also "tax-loss selling", especially in North America. We look at some stocks that have suffered significant losses but could now take off again.

time to read: 4 minutes | Author: André Will-Laudien

Table of contents:

    Joe Bleackley, CEO, Pathfinder Ventures Inc.
    "[...] In addition to campsite fees, Pathfinder Ventures has put itself in a position to offer all of these sought-after camping solutions. The only thing they don't sell is the RV itself. [...]" Joe Bleackley, CEO, Pathfinder Ventures Inc.

    Full interview


    China Big Tech - After the sellout, now the rally

    The Chinese Internet giants have had the worst stock market year since their foreign listing on the NASDAQ. Former President Donald Trump had set the West-East feud rolling with trade restrictions and punitive tariffs, and later SEC regulations put pressure on the opaque tech companies. Large and successful funds such as Cathie Woods' ARK Innovation ETF had to give up 70% at the peak and has now shed almost all Far East stocks. However, this also means that the ongoing selling pressure should gradually be over for the big tech stocks from China. The largest position in the said fund is now Tesla, with just under 10%. However, the Elon Musk share has also lost over 40% in the last 12 months. For a few days now, buying interest in tech stocks has been emerging again. Alibaba has impressively turned around from a low of EUR 59 and gained 30% to EUR 78 in just 2 weeks. Tencent even managed a 40% gain from EUR 25 to EUR 36. Both companies are now delivering their Q3 figures. It is again worth taking a closer look and making initial allocations.

    Inflation at 30-year high - With gold against the loss of purchasing power

    Inflation figures are rolling over on both sides of the Atlantic. Driven by high energy and food prices, consumer price indices are entering the new year with double-digit rates. Significant increases in the cost of intermediate products and raw materials for industrial manufacturers are also having an impact. According to Destatis, Germany's producer price index showed an increase of 45.8% in September, with the energy component exploding by 132.2%.

    In such an environment, precious metals come back into play. They have gained about 500% in the last 20 years and compensated for all currency losses from the DM/EURO conversion. Those who bought an ounce of gold in 2002 at USD 270 today own the equivalent of USD 1,780, making an average return of 9.88% per annum. It was possible to earn even more if one bet on gold in the ground during downward cycles because the buyer of exploration companies only profits in the future from corresponding rises in the underlying metals.

    Desert Gold - The big opportunity for a trend reversal

    Canadian explorer Desert Gold Ventures (DAU) enjoyed excellent exploration success at its SMSZ gold project in Mali, reporting a gold recovery rate of 88% in the summer. The most recently published resource estimate is 1.1 million ounces of gold, which can certainly be expanded significantly. The Company is therefore continuing its announced 35,000-meter drill program and will be able to report results soon.

    Desert Gold shares have been caught in the downward swirl of the Juniors and are currently trading at CAD 0.06 to 0.08. At the end of the year, especially in Canada, tax-motivated portfolio shifts, so-called "tax-loss selling," are underway, which lead to few comprehensible sales actions and press on the thin order books. With good drilling results, Desert Gold should again see an initial price jump. This already happened at the beginning of 2020, when it was 400%.

    Deutsche Bank and TUI - Chart technically, this could be it

    Two interesting German stocks are still worth focusing on. Deutsche Bank has presented record results in the last two quarters. Before taxes, the institute earned around EUR 1.6 billion, almost three times as much as a year earlier and more than at any time since 2006. Higher interest rates, in particular, gave the institution a boost, and the digital transformation is beginning to bear fruit. "Deutsche Bank is fully on track to achieve its targets for 2022," CEO Christian Sewing said most recently. With the good figures and the joyful outlook, the technical breakout above the resistance of EUR 10 was successful, and the share price is now targeting the next hurdle at around EUR 11.20. The 12-month loss is still just under 9%, which means that the share is already outperforming the DAX.

    Investors need a thick skin for the TUI share. First, the near bankruptcy of the Corona pandemic, which could only be averted with state aid. Now, the burdens from the war situation. Gradually, the travel industry will have to face a new era in terms of climate change. Due to the strain on household budgets, travel has become a luxury for many citizens, and ultimately the volume of travel will painfully adapt to this situation. Due to the inflationary environment, long-distance travel and hotel accommodation, in particular, are a good 50% more expensive than in 2019. In recent years, TUI has lost large market shares to online booking platforms such as, Expedia and Co. The new group boss Sebastian Ebel does not want to accept this development. In his new strategy, package tours will no longer be the travel group's mainstay. Special trips and configured offers will now be developed - sounds exciting from the mouth of the king of the classic 2-week flight-hotel trip. Hamburg-based analyst firm Berenberg sees little hope and votes "Sell" with a price target of GBp 100. Chart-wise, the TUI share offers a trading range of EUR 1.35 to EUR 1.85. Fundamentally, the high level of debt is putting permanent pressure on profits.

    For many investors, the last quarter of the year is the time for tax optimization. That means stocks that have fallen particularly sharply tend to be sold further in order to obtain a tax credit or loss provision. Then, profits can be collected without deduction when the stock market eventually turns around again. The medium-term scenario for precious metals should slowly improve in the inflation environment, which allows values to be hedged.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    André Will-Laudien

    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.

    About the author

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