June 10th, 2022 | 19:43 CEST
Turnaround stocks: BYD, JinkoSolar, MAS Gold, Nordex - Watch out for China & Tesla!
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"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
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.
Despite NDX weakness, China stocks are on the rise again
With investors currently believing in an end to Beijing's regulatory frenzy, favorite China stocks no longer know any brakes. Alibaba Group shares thus climbed more than 40% in the past two weeks to around EUR 115. Yesterday, there was some profit-taking, but that was not a disaster. After the end of the lockdown, the mood seems to have returned. Market participants see the extreme rises as a harbinger of a comeback for tech stocks. Fundamentally, the figures suggest that Alibaba and Tencent shares, for example, have by no means reached their fair price. So the rally could still go on.
BYD and JinkoSolar - Close to their highs
Two China stocks that are performing very well fundamentally are BYD and JinkoSolar. The wave of buying with climate change motivation has fully hit the companies' books. A good thing because China's annual greenhouse gas emissions exceed those of all developed countries combined for the first time, according to a new Greenhouse study. In its comparison with EU countries, the US and other members of the OECD, the US think tank Rhodium Group also estimates that the most populous country alone has contributed to 27% of global CO2-equivalent emissions since 2019, far more than the US in second place at 11%.
BYD, the Warren Buffett-backed Chinese electric car maker, recently surpassed German auto giant Volkswagen as the world's third most emitting vehicle manufacturer. This development was favored by the booming electric car sector in China. A threefold increase in the share price since 2019 has now seen the Company's market capitalization reach EUR 100 billion, significantly surpassing Volkswagen's EUR 95 billion. JinkoSolar, the largest solar module manufacturer, is still benefiting from the green energy boom. The share reached a new 2-year high of EUR 63.80 in June. However, due to the doubling of the share price since the summer of 2021, we are technically cautious; the share is currently strongly overbought. Both BYD and Jinko fit very well into a long-term growth portfolio, but both values fluctuate technically by a good 50% per year and are currently positioned relatively high in the chart. Therefore, set strategic stops at EUR 32.60 and EUR 55.20, respectively. Nevertheless, while the troubleshooter Tesla continues to crash, the charts of BYD and Jinko are entertaining at the moment.
MAS Gold and Nordex - Fundamentally attractive, chart-technically burdened
Two other stocks are currently attracting attention with conspicuous chart formations. The Canadian Company MAS Gold Corp. is an explorer that focuses on potential gold projects in the promising La Ronge gold belt in Saskatchewan. Four properties are being worked in this belt, extending along approximately 60 kilometers of the geologically prospective La Ronge, Kisseynew and Glennie domains. The latest drill results showed average grades of 0.61 to 1.88 grams of gold per tonne of rock for a total of over 4,000 meters. An additional 772 and 996 meters of drilling were completed at the Point deposits on Ramsland Lake and the recently acquired Preview SW gold deposit.
The Company's objective is to define a sufficient gold resource over the next few years to make a medium-term production decision. The Company recently raised CAD 1.73 million for the next exploration steps. The placement price was 8 cents per share plus a warrant with a basis of CAD 0.20 for 24 months. Junior explorer markets are incredibly bearish at the moment. Still, the closing of this first tranche shows that shareholders strongly support the Company's strategies to achieve its goals of expanding its gold resources. MAS shares are currently trading at their financing price of CAD 0.08, and the entire project is valued at only a low EUR 10 million.
Nordex stock is currently forming a technical double bottom in the region of EUR 10. The Company's order books are full to the brim, but the problematic supply chains are resulting in delayed completions, and the increase in commodity prices has led to margin losses on many old contracts. Investors are currently uncertain whether Nordex can cope with its high-cost base under the current circumstances and will be in the black in 2 years as forecast.
At the moment, a profit warning has been issued: In 2022, the Company will only be able to achieve an operating profit in the best case scenario. Rather, the Company expects an operating loss. "We have to assume that some of the exogenous effects will accompany us into the coming year," the Company announced unsurprisingly at the end of May. With a crashed share price of EUR 10.3, the market capitalization is now only EUR 1.7 billion. Analysts are split: Goldman Sachs is Neutral, and Jeffries advises Buy, though the price target dropped from EUR 20 to EUR 16. On June 20, the Company reports on the first quarter. Exciting!
Still, the stock market is out of control. Yesterday, the ECB tried to bring calm to the markets and indicated few interest rate hikes despite inflation of 8%. We believe that the weak economy would not tolerate large interest rate increases. China should be back on the radar when selecting equity investments, apart from which there are always technical opportunities for a turnaround when the news situation improves.
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