SQM (SQM) is the world’s 2nd biggest lithium company and shares are trading at a record all time high up 95% this year - and for good reason. It sees lithium prices staying higher and demand rising 40% this year. It also sees prices and demand continuing to remain strong in 2023. SQM also sees strong demand from the Chinese electric vehicle market, which is buttressing solid demand for lithium. This varies to Goldman Sachs thinking, as they say Chinese EV market will move toward a demand-constrained state over the next 1-2 years. As a house, Saxo, remains optimistic on energy commodities, including lithium however we continue to monitor the situation. The risk is that there is a global recession or oversupply kicks in. Goldman Sachs believes the lithium price in China will continue to rise into 2023 before falling in second half of the year, as it sees the market moving into oversupply. SQM makes about 33% of its revenue from lithium and the remainder is from fertizliers. And both markets are currently tight.
Another lithium stocks to watch is Albemarle (ALB). Its shares are also trading in all time record high neighborhood. They are up 21% this year buoyed by the lithium price being elevated. I guess what you need to consider is, companies like SQM and Albemarle have been growing their revenue by triple digits, and this is even ahead of China reopening.
Fortescue (FMG) is Australia’s biggest iron-ore-only producer, and it makes the majority of its revenue from China. Fortescue Metals shares have strongly rebounded this month, rising up 32%, after the iron ore price rose about 23% this month with China announcing a series of policies to rescue its property sector. However, COVID cases in China are picking up, and one region near Beijing has asked residents to stay home. So, there are concerns China will clamp down on restrictions, which could see the iron ore price pull back, along with shares in iron ore companies. But we will have to wait and see.
Oz Minerals (OZL) is also front a centre with a strong increase in appetite for its shares, after BHP increased its takeover offer to $6.4 billion for copper company. This reflects the hungry to move into copper, given copper is a vital metal in electricity networks, electric vehicles, and renewable energy. BHP currently makes 26.7% of its revenue from Copper but wants to increase that. BHP also makes 24.6% from coal, and 48.7% from iron ore. As a house we are bullish on copper long term, given demand is expected to rise about 60% by 2040. The Copper price is up 11% from its July low with supply showing signs of tightening. For copper to potentially move higher, from $3.63, you might need to see it break over the $4 to $4.05 area, which could be a critical momentum changing resistance level, that might change things in Copper around.
Ross Stores (ROST) is on watch with traders expecting solid Black Friday sales. Ross Stores shares are up 17% this month with the extra kick coming from the retail company upgrading its fourth quarter outlook. Its shares are now now trading up 62% off their low and are back at November 2021 levels. The discount department store is seeing sales momentum improving. For the year ahead, consensus is that 2023 sales growth will be flat, but profit growth is expected to marginally improve.
Cisco (CSCO). It’s a $196 billion computer network giant, and its shares have continued to rally up off their two-year lows after the company reported stronger than expected earnings results and upgraded its full-year forecast. Recurring revenue from its new offerings rose to more than $23 billion on an annualized basis, with greater availability of chips helping Cisco fill more orders too. For total full 2023 year revenue, Cisco sees it rising 6.5%, which is more than its prior outlook (of 6%) and more than market expectations. On the other hand as for its expenses, like a lot of tech companies like Twitter, Meta and Amazon, Cisco is feeling the inflation and interest rate pain, so plans to cut 5% of its employees (amounts to about 4,000 people). From a technical perspective its shares are also worth watching too, particularly on the weekly and monthly charts as it looks like buying is picking up.
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