April 20th, 2022 | 13:30 CEST
Twitter, Alibaba, Triumph Gold - Inflation protection: Golden times for good stocks!
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
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.
Interest rate rise - The 10-Year Federal bond scratches the 1% yield mark
German Bunds have lost dramatically in price value in recent weeks. In parallel, the futures contract Bund future fell for the sixth week in a row. At the beginning of the Ukraine crisis, the contract was still trading at over 171%, but yesterday it fell well below 154%. The current yield on 10-year Bunds jumped from 0.26 to 0.96% in April alone, and mortgage rates for 10-year fixed rates exploded to over 2% in new business - the highest level in seven years. Bond prices are being weighed down above all by growing inflation concerns. For overpriced stocks and real estate, the risk is now rising noticeably.
Triumph Gold - It can happen very quickly
An inflationary environment is often paired with a stronger investor interest in precious metals. Consumers perceive the creeping devaluation of money as expropriation since we have been spoiled with meager inflation rates for a good 15 years. In view of exploding money supply and debt levels worldwide, however, the current surge in inflation was a foregone conclusion. Admittedly, the war in Ukraine has led to global commodity shortages and sharp rises in energy and food prices. Such a phenomenon can last a long time, even if the reasons should disappear again due to a surprising peace agreement.
The Canadian Triumph Gold Corp. is attracting attention with a showcase project in the Yukon Territory. The Dawson Range property hosts three world-class mineral deposits in the extensive section of the Big Creek fault zone. In addition to grades of up to 2 g/t gold and 1.57 g/t silver over 4.5m and lower grades around 0.5 g/t for both elements over 46m, recent results indicated a possibility of low-cost leach mining, which could keep mining costs very low. In addition to gold, industrially recoverable copper can also be found in the zone. For copper, in particular, the outlook is stormy. Triumph will continue its exploration work in 2022, and we expect good results here.
There is currently no great activity in the TIG share, which is currently to the benefit of newcomers. Because if, as Goldman Sachs predicts, a perfect gold scenario towards USD 2,500 per ounce lies ahead, then the lagging explorer stocks, in particular, should start to sprint. TIG shares are currently trading between CAD 0.09 and 0.10, valuing everything together at just CAD 13 million. Those who believe in the gold breakout are in the right place here.
Twitter - A poison pill for Elon Musk
An open exchange of blows can currently be observed on Twitter. Elon Musk offered to buy the Company from all free shareholders for the equivalent of USD 54.20, but there were negative reactions from the board of directors. Musk had bought up a 9.2% stake in Twitter via the market in recent weeks. Now he wants to take the Company off the stock market. Not quite so in the sense of the majority owners because they smell much more "value" in the popular social media stock. As a proposal for countermeasures, the Board of Directors would like to make further share purchases more difficult by statute for shareholdings of 15% or more.
For Musk, the Twitter platform offers the potential for free expression of opinion on all topics of the day. He believes the Company needs to be repositioned in line with this purpose. In the meantime, strategic investors such as Alphabet have also spoken out, and investment companies such as Apollo and Thoma Bravo are also expressing interest. It could still become exciting around Twitter. With a 50% gain in just 4 weeks, the stock is celebrating a technical recovery that could continue for a while. Stay invested with a safety stop at EUR 38.
Alibaba - Management increases share buyback program
Chinese tech giant Alibaba has been among the worst-performing tech companies over the past 15 months. While the stock is down about 20% year-to-date, it is nearly 70% away from its all-time highs of October 2020. By comparison, the S&P 500 has corrected about 8% since its all-time high at the beginning of the year.
There are indications that the Chinese regulators will soon come to an end with their investigations regarding data and customer protection and antitrust issues, as Alibaba has already been fined a significant antitrust fine. Its subsidiary Ant Group has even been ordered to spin off some of its credit and lending businesses. Additionally, China stocks are still under fire for flouting US audit rules. And now there is the renewed lockdown - quite a lot of arguments for the weak share prices of the last months.
However, we believe that the sell-off in March should already have priced in a lot. At a current price of EUR 85, Alibaba is trading at a P/E ratio of 11 for 2022. Management also thinks it has recently increased its share buyback program from USD 15 billion to USD 25 billion. Collect below EUR 90!
Inflation remains pervasive, and bond prices are falling. In such an environment, it gets tricky for stocks. Some NASDAQ stocks like Twitter and Alibaba look quite good technically. Junior gold stock Triumph should see the current demonetization play into its cards; the project is promising.
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