Varta, Defense Metals, BYD: What does Tesla need more urgently?

Varta: Too much of a good thing

For several months, Varta has also been the subject of hot speculation on electromobility. The reason: the Company is planning to enter this field. Since Varta is the technology leader and is considered the first choice of global corporations, many market observers believe that the plans could well turn out to be something. But as is often the case on the stock market, the market gave out too much praise too early. The share price climbed sharply, in some cases reaching a level of over EUR 180 last year. In the meantime, the value is trading back in the double-digit range again, although things are actually looking good around Varta.

In the middle of last year, Varta opened a new factory for lithium-ion cells. As a result, the Company can now produce up to 400 million battery cells per year. Varta has maintained its guidance for the full year - the operating margin is expected to increase slightly to 30%. Given its good market position in all aspects of rechargeable batteries, Varta should continue to play a significant role in the future. Consumer electronics and e-cars are the main areas to be mentioned here. However, last year's e-car hype was too much. Investors are now looking so closely at Varta that even the current valuation may be too expensive for them. Everything seems as if the share will remain in double digits.

Defense Metals: Management reinforcements and operational progress

The Defense Metals share is a long way from double-digit prices, but that is only fair. The reason: Defense Metals is a growth company that owns one of the few prospective rare earth properties in North America. Rare earths are found in many areas that we now associate with the future: Batteries for electric cars, electronics and displays. The defense industry is also dependent on the metals, which is why the USA has long regarded rare earths as critical raw materials that need to be secured and mined domestically, or at least in North America. For years, China was the unrestricted player around rare earths. That wasn't such a big problem before 2019, as international trade in goods meshed smoothly, and division of labor was the economy's most important maxim. But times have changed - and not only because of the pandemic.

Geopolitical conflicts are breaking out and fit into the picture of an economy in which self-sufficiency is more important than synergy. Defense Metals plans to hit the ground running with its Wicheeda project in 2022 and has already submitted an economic feasibility analysis. Work on a preliminary feasibility study is expected to begin later this year. In parallel, the Company plans to expand its resources and confirm existing assumptions about deposits. Defense Metals is also picking up steam, as evidenced by several personnel decisions: After the Company was able to attract Luisa Moreno as president, John Goode, an expert in rare earth processing, recently joined the Company as a consultant. "John has already made a significant contribution to the metallurgical process development of the Wicheeda rare earth project. We expect him to continue to bring his considerable expertise to the project as we move towards a pre-feasibility study," Moreno commented on the personnel move. After months of sideways movement, the shares could trend more friendly as operational progress is made and expectations for 2022 are met. While manufacturers of rechargeable batteries fight for technological supremacy, Defense Metals wants to supply raw materials needed in the future.

Defense Metals will soon be present at International Investment Forum (IIF). CEO Dr. Luisa Moreno will provide live insight to interested investors at 1:15 p.m. (CET) and will be available to answer questions. Free registration for the Zoom call is still available.

BYD: Good position, weakening stock

For the time being, the Chinese at BYD are unlikely to rely on rare earths from the USA - China recognized the importance of the metals early on and is the undisputed market leader. However, since BYD is also striving to enter new markets, it cannot be ruled out in the long term that the electric pioneer from China will also install US batteries.

The Company does not have the reputation of being broadly positioned without good reason. Thanks to its battery and chip division, BYD can be a bit more optimistic about the current problems of traditional car manufacturers due to disrupted supply chains. However, even for BYD, the air is out for e-car stocks that have already done well. Even encouraging sales figures could not turn the tide for BYD in recent weeks.

While old familiar e-car stocks are caught up in reality and have been weakening recently, Defense Metals seems to have already found its bottom. With commodity producers facing less competition than battery makers, investors may want to bookmark the rare earth stock Defense Metals. The latest developments at the Canadian Company are heading in the right direction.