Bavarian Engineering Excellence
We start with a true gem of German engineering—one that is not bringing much joy at the moment, though. Shares of this long-established Bavarian conglomerate are currently trading at a multi-year low near EUR 58. But do not let this sell-off, which is certainly partly irrational, fool you. Yes, there are headwinds, and the entire industry is groaning under the weight of weak demand from China and high energy costs. For BMW, a recall in North America due to a potential corrosion issue with the starter relay has now compounded the challenges. But we are still talking about BMW here. And the automaker is, let’s not forget, a profitable automotive group with a fairly low valuation.
A price-to-earnings (P/E) ratio of just over 5 and a dividend yield of well over 5% are a fundamental invitation to buy. The market is punishing the Bavarian automaker for the current, though perhaps only temporary, economic downturn, while completely overlooking the underlying value and global appeal of this premium brand. At the end of June, the preferred shares were converted into common shares, which simplifies the structure. Anyone who does not see the long-term opportunity here may be blinded by short-term panic. BMW will likely bounce back, and possibly emerge even stronger operationally than before. Those looking to bet on a rebound may be presented with a great opportunity right now.
We leave the asphalt behind and shift our focus skyward, beyond the atmosphere and into space, where valuations seem to be just as weightless as the rockets themselves.
The Fall of the Hype Rocket
SpaceX, or rather, its founder, has fired up investors’ imaginations, but Elon Musk’s space company is currently experiencing a hard crash landing and coming back down to earth. Just a short while ago, the market celebrated the IPO as a historic event. At an offering price of USD 135, investors scrambled for the shares, driving the price above USD 225 and inflating the valuation to an absurd USD 1.7 trillion. But the euphoria evaporated almost as quickly as rocket fuel does at launch.
Most recently, the stock fell below its offering price for the first time, trading at just over USD 132 at one point. When viewed objectively, the numbers reveal the problem very starkly. Revenue of just under USD 19 billion is offset by a massive loss of nearly USD 5 billion. Investors have paid a high price for mere hope in the distant future—and some are still doing so when they buy the stock. Currently, the share is still trading at 49 times expected revenue. However, there are also investors who view this drastic weakness as a welcome opportunity.
Star investor Cathie Wood, for example, has stepped in with her ARK fund, or rather, a sub-fund from her investment empire, and purchased over 120,000 shares. It remains to be seen whether this extremely bold move will ultimately pay off. We expect the next quarterly report in August, which will reveal whether SpaceX can narrow the deep financial black hole.
While investors are pouring their money into SpaceX based on vague promises, some observers may prefer to return to what is truly enduring: gold!
An Up-and-Coming Player in West Africa
Finally, we turn to Desert Gold, an emerging player in the West African gold sector. The Canadian company is focused on achieving its goals at its SMSZ project in Mali. News reports from recent months paint a picture of a company that is clearly planning and diligently carrying out its work.
An ambitious drilling program covering 4,250 m began in late April. The operational goal is clearly defined: the company aims to expand known mineralizations and significantly increase the resources surrounding the planned Barani mine.
The news update from early May was also encouraging. Preparations for the gravity separation plant at Barani East are in full swing. A large portion of the site has already been cleared, the equipment for the planned production is already on its way from China to Dakar, and commissioning is scheduled for July.
This is an important milestone on the path to actual gold production. The underlying economic assessment is impressive, assigning the project a net present value after taxes of USD 61 million and an internal rate of return of 57% at a gold price of USD 2,850 per ounce. Analysts at GBC also see significant upside potential and have set a price target of EUR 0.59 (CAD 0.95) per share.
From a technical analysis perspective, the key now is to sustainably break above the CAD 0.15 level. If this is achieved, the path toward CAD 0.30 is relatively clear. Although the GBC price target is still a long way off, reaching CAD 0.30 in the medium term appears very plausible, provided progress continues as planned, gold prices remain stable, and production starts on schedule.
In conclusion, it is safe to say that the stock market currently has something to offer for virtually every investor. BMW remains a fundamentally strong, albeit currently battered, investment that attracts investors with an attractive dividend yield and substantial underlying fundamentals. A rebound could be on the horizon here.
SpaceX represents a high-risk bet on the technological future, where the “gravity of weak balance sheets” currently weighs noticeably heavier than shareholders’ imagination. Caution remains warranted here!
Desert Gold stands out for its methodical progression toward becoming a gold producer. If the Canadians successfully meet their upcoming production targets in July and the drilling programs confirm additional resources as hoped, this stock offers a solid chance for further price gains.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as “Relevant Persons”) may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a “Transaction”). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
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