September 14th, 2022 | 10:20 CEST
Up and away! Lufthansa, TUI, Viva Gold, Aston Martin - Turnaround stocks take off!
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"[...] 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.
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.
The new gold - Sports cars and classic cars
For most investors, the last 3 years have been very mixed. Most successes were had with the ever-popular FAANG stocks. Even after an interim correction of up to 50%, they have returned to their old strengths. The average standard stocks experienced ups and downs. In between, there were bulls in digitalization and strong momentum trends in GreenTech, such as hydrogen.
However, one important point could cause problems for equities as an asset class in the medium term. On the one hand, P/E valuations have risen from an average of 13.5 to 18.5 within 5 years, while on the other hand, ten-year interest rates have advanced from zero to a zone of 1.5 to 5.0%. Countries with high debt levels are again experiencing refinancing problems, which means that the interest rate requirements of capital providers are rising further. In this high-inflation environment, alternative asset classes have held up relatively well. Art, wines and certain vintage car collectors' models have selectively gained enormously in value, as they cannot be further multiplied at will. However, their future performance is also linked to the purchasing power of the more affluent population segment.
The English sports car manufacturer Aston Martin, known as the wonder car of the British 007 agent James Bond, has undergone a drastic turnaround and only narrowly escaped bankruptcy in 2020. A complete model relaunch and the entry of Mercedes-Benz saved the noble brand from the brink for the time being, and now there is another large capital increase of GBP 575.8 million. The aim is to reduce the high level of debt and expand new business areas. Because few investors currently want to add to their holdings, the rights issue was made at a discount of 79% to last Friday's closing price. As a result of the latest transactions, Saudi Arabia now holds 16.7% of Aston Martin, Yew Tree 18.3% and Mercedes-Benz 9.7%. Whether this will eventually boost the share price remains questionable because the new model range must first find well-heeled buyers.
Viva Gold - Good prospects in Nevada
For years, the central banks of the USA and Germany have held the largest gold reserves in the world. The gold holdings of other developed countries such as France, Italy, Switzerland and Japan have also been virtually unchanged for years. For the first time in about 20 years, the gold reserves of central banks have fallen slightly by 88 tons worldwide as of the 2022 mid-year point. Thailand led the ranking of the largest gold buyers in 2021 with a good 90 tons, followed by India. The Philippines made the largest gold sales this year, with around 31 tons. The gold holdings of private individuals must therefore have increased successively, at least that is what the partially sold-out dealers of physical goods report. How the shifts in gold holdings have developed during the period of geopolitical conflicts should soon be of the greatest interest.
In uncertain times, there is also a particular demand for gold reserves in the ground. Here, the charm lies in future availability that can be drawn when necessary. However, price declines from above USD 2,000 to below USD 1,700 in recent months have also led to sell-offs in explorer shares. Top positioned Canadian explorer Viva Gold owns a 4,250-acre property in Nevada. It lies within the historically famous Walker Lane, where Kinross, Coeur Mining, Augusta and Centerra operate. There have also been spectacular acquisitions in this district in recent years, for example, with the Bullfrog Mine.
In the company-owned Tonopah area, there were now a few results to announce from the ongoing drill program. A buried gold deposit was identified with mineralization up to 19.9 g/t AU over 1.5 meters. It lies beneath the valley floor gravels and is not outcropping, meaning all geological and structural information must be acquired either by drill holes or geophysical methods. "The data collected in this program provides the information needed to conduct the geotechnical study to prepare a pre-feasibility study (PFS) for the project," said James Hesketh, CEO and president. These preliminary studies are being conducted now, and the PFS is expected to be initiated in 2023.
Viva Gold shares (VAU) are traded in Canada and Frankfurt. With 91.6 million shares outstanding, the market value is currently only CAD 6.4 million, but over half of the capital is in firm hands. With the next pick-up in precious metals, it should increase significantly here again.
TUI and Lufthansa - Are follow-up bookings for the winter now coming?
At TUI and Lufthansa, three crosses will be made when the summer is over. On the one hand, of course, there was a veritable wave of bookings to cope with due to the many COVID catch-up effects; on the other hand, both companies lacked resources, especially employees. Many employees had reoriented themselves during the pandemic and turned their backs on tourism. In the case of Lufthansa, the Cockpit pilots' union has now also gone on strike, causing further uncertainty in operations, especially at the end of the vacation season.
Whether the two tourism giants have covered themselves in glory with the service they have shown this year will be seen in the subsequent booking periods for the winter and spring business. Lost luggage, flight delays and unexpected cancellations are not exactly boosting customer loyalty. Many people are now likely to enjoy their vacations at home again or switch to rail due to high fuel costs. Air travel and long-distance travel have brought more stress than relaxation to those seeking recreation in 2022, which contradicts the principle of "vacation". Because after all, these 2-3 weeks are supposed to provide the deserved time out from the strenuous job and the rest for families. The industry has completely failed to live up to this claim.
The shares of TUI and Lufthansa are thus also under permanent pressure. Even the balance sheets are feeling the impact of the many recourse claims from customers. Despite all the criticism, the lower reversal zones in the prices now seem to be formed. Lufthansa has found a bottom in the EUR 5.50 area, and TUI recently reached a cyclical low of EUR 1.43. Both stocks are preparing to win back their investors; from a technical perspective, buybacks are likely. The next booking season will show how high it can go.
Stock investment is subject to difficult circumstances. On the one hand, interest rates and inflation continue to go up, and the euro remains weak. The purchasing power of consumers is thus increasingly reduced over historical time. With a certain delay, corporate profits will therefore gradually trend downward. If the Ukraine war ends quickly, there will be short-term buying incentives, but this will not prevent the impending economic downturn. Investments in precious metals and mining companies can reduce portfolio risk.
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