01. February 2021 | 07:10 CET
Xiaomi, Fokus Mining, Varta - invest in safety!
After testing the all-time highs of the DAX and Dow Jones at the beginning of the year, the indices have entered a correction mode in recent days. Uncertainties regarding the procurement of the Corona vaccines, a possible extension and tightening of the lockdown, and weak corporate figures have slowed down a further flight to the heights of the world's stock markets. The current showdown regarding the GameStop share between hedge funds and Robinhood traders confirms the chaotic overall picture. Invest in safe havens, invest in gold!
time to read: 3 minutes by Stefan Feulner
Gold corrected since its all-time high on 6/8/2020, which was USD 2,069.70, and fell below the critical support line at USD 1,800, which, however, was initially dynamically recovered. The precious yellow metal is currently fighting for the downward trend formed since August 2020 at USD 1,875. A sustainable overcoming would set the target again at USD 1,960, which was already tested at the beginning of January. In the long term, we expect prices to rise significantly due to the high debt policy currently being pursued. Therefore, it now makes sense to build initial positions in both gold and selected gold mining stocks.
Great opportunities in the golden triangle
The share of the gold explorer Fokus Mining should be looked at more closely. The Canadians focus on the acquisition and exploration of significant precious metal deposits in the province of Quebec. Management sees particular potential in the Galloway project, which was purchased in full last summer. The three main zones of GP, Hendrick and Moriss, are the three most important points of the project and form the so-called Golden Triangle. Although not directly adjacent, the various gold zones, including a fourth, the Hurd Zone, could be connected at the surface and underground to form a potential corridor of approximately 1.7 kilometers. The acquired property is located in one of the most productive mining regions in North America, with perfectly developed infrastructure. In the last 100 years, more than 100 million ounces of gold have been produced from these mining sites.
Full cash, full program
With CAD 5 million, the drilling program for 2021 is fully financed. A 40,000 m diamond program at the Galloway project already began in November last year. Fokus Minerals CEO Jean Rainville expressed satisfaction with the results to date and expects to continue to deliver regular positive news flow throughout the year. Fokus Mining shares are currently trading at CAD 0.31, down from a high of CAD 0.47 at the end of November. An initial investment before the release of further drill results could well be a suitable time.
Under the spell of Reddit and Robinhood
Quite an ordinary course for the Varta AG share price if one looks only at the week's opening and closing price. The battery producer started the week at EUR 131.40 on Monday and left the trading floor with a nice plus at EUR 147.20 on Friday. So far, so good. In between, there was a short squeeze and the achievement of an all-time high at an incredible EUR 180.10, followed by an equally unbelievable correction. Of course, the culprit was the prevailing theme this week - the battle between the hedge funds and the Reddit traders. In addition to the most well-known stocks, such as GameStop or Nokia, the German stocks Varta and Evotec were also affected by the hedge fund Melvin Capital's short selling. Melvin was short 4% of Varta and 6% of Evotec.
Position almost out
As of Friday, the hedge fund still had almost 0.50% short positions and is expected to have closed out by the end of the trading session. So, there should be no more pressure on the German battery share. The analysts at Kepler Chevreux were all the more negative about the Varta share and see a price target of EUR 88 for the paper. The reason is the battery manufacturer's cautious outlook for the full year 2021. We recommend letting the current events at Varta settle. Larger upward and downward swings are quite possible at the moment and are more like a lottery. In the longer term, however, one should have the title on the watch list.
Xiaomi sues the USA
The Trump administration had blacklisted Xiaomi shortly before the end of its term. The cell phone manufacturer is accused of having ties to the Chinese military. Xiaomi denies being controlled by the government and has now filed suit. The Chinese contradict the US government's view stating that Xiaomi only manufactures products for civilian use.