These shares are right on trend - BYD, Defense Metals, Rheinmetall

BYD - Unstoppable

The general conditions are complex, with a significant weakening of the economy, but the Chinese market leader BYD is still outperforming all its competitors in the third quarter. The Warren Buffett-backed company increased its sales by 38% to EUR 20.67 billion compared to the same period last year. Compared to the second quarter, this represents an increase of 16%. Profit exploded by 82% to EUR 1.33 billion, which was even higher than analysts' consensus estimates. Compared to the months of April to June 2023, this key figure rose by around 30%. BYD's 12-month sales already exceeded 2.83 million units at the end of the month. The target for 2023 is to sell 3 million rechargeable cars, which requires over 300,000 sales in the last two months.

The positive trend also continued with the delivery figures for the month of October. BYD set a new delivery record, with more than 300,000 vehicles sold. In October last year, the Shenzhen-based company handed over 217,816 units to its customers. The vast majority of BYD sales occurred in China, while exports accounted for around 10% of the overall result.

The news that Warren Buffett sold further BYD shares worth USD 25.78 million did not stop the BYD share price from moving upwards, reducing his stake further to 8.05%. At USD 31.05, the share price is now only marginally below the downward trend of USD 32.12 that has been in place since the end of July. A sustained break would generate a new buy signal with the aim of attacking the high for the year at USD 35.50.

Defense Metals - Positive results confirmed

Climate change and the increase in defense industry budgets have made critical raw materials an essential commodity. These are rare earth metals that ensure the necessary efficiency in electric motors and wind turbines. An electric car contains around 3 kg of these metals, while a wind turbine contains a hundred times that amount. The raw material is also of strategic importance for the economic and military security of the West. They are indispensable in numerous civil and military technologies. Due to growing geopolitical conflicts and the trade war between the US and China, there may be supply bottlenecks in the near future, as the Middle Kingdom has a virtual monopoly on the value chain, from mining and processing to refining and producing rare earth metals and alloys. The West must take action, but the number of deposits ex-China are few and far between.

In addition to concessions in Australia, the Mountain Pass mine in California is one of the flagships. The site, which has received millions in subsidies from the US government, accounts for 15% of global production. The market capitalization of the operator, MP Materials, is an impressive USD 2.92 billion.

In contrast, Defense Metals has a market capitalization of just CAD 33.41 million. It is more than logical that there is such a discrepancy in the valuation, as Mountain Pass is already in production. Nevertheless, the enormous potential of the 6,759 ha Wicheeda project, in which Defense Metals is the 100% owner, is clearly evident. In addition to first-class infrastructure, the project in British Columbia, Canada, has the same metallurgy as its big brother. In future, 25,000 tons of rare earth oxide per year, which equates to 10% of current global production, are to be mined here.

A less noticed announcement by Defense Metals recently brought to the public's attention was the submission of the detailed technical report of its updated mineral resource estimate for their flagship project. The report is based on data from approximately 10,350 m and 45 drill holes explored by Defense Metals in 2021 and 2022. The previous resource estimate from 2021 was increased by 17% in terms of contained metal and 31% in terms of tonnage. The 2023 estimate includes 6.4 million tons of Measured Mineral Resources averaging 2.86% total rare earth oxide, an Indicated Mineral Resource of 27.8 million tons averaging 1.84%, and an Inferred Mineral Resource of 11.1 million tons averaging 1.02% rare earth oxides.

As a result of the correction in the commodities markets, Defense Metals' shares have also lost around half their value since mid-February. Given the potential of the Wicheeda project, there could be a multiplication opportunity here in the long term.

Rheinmetall AG - All in good shape

The geopolitical situation is explosive, and the warlike events surrounding the Gaza Strip appear to be escalating further. What is sad for the world community, on the one hand, means a boom for global arms companies. From today's perspective, it is almost impossible that this situation will change in the next few years. This means that the integrated technology group from Düsseldorf is set for further growth. The British investment bank Barclays continues to see Rheinmetall as an "outperformer" with a target price of EUR 300 based on the medium-term prospects.

The importance of the DAX-listed company, particularly in Europe, is demonstrated by the fact that high-ranking politicians from Western countries are in direct contact with Rheinmetall's top management. For example, the Ukrainian Foreign Minister Dmytro Kuleba met directly with CEO Armin Papperger during his visit to Germany to explore the possibility of further armaments cooperation.

"Ukraine will have more weapons and ammunition to defend itself and protect civilians and infrastructure from Russian attacks," wrote the diplomat after his meeting on the X platform, formerly Twitter. With the support of Rheinmetall, among others, Kiev wants to rebuild and modernize its own arms industry, which has been heavily affected by Russian attacks.

The electric car manufacturer is not letting the weak economy slow it down and is posting record results. Rheinmetall continues to benefit from the rising demand for military equipment. Defense Metals is seen as a beacon of hope in the production of rare earth metals for the Western world.