Market & Metals Navigator (November 15, 2020)

Pfizer’s Coronavirus Vaccine Lifts Old Economy Stocks

Last Monday’s news that Pfizer’s vaccine maybe 90% effective at preventing COVID-19 gave the old economy stocks a big boost. The Dow Jones Industrial Average finished the week up 4% while the tech heavy Nasdaq ended the week down -1.3%.

The 90% effective rate for Pfizer’s coronavirus vaccine is significant when compared to other successful vaccines like polio and chickenpox.  The flu shot in comparison is only 45% effective.

Any good news on the vaccine front is much needed given the surge in coronavirus cases globally.

The situation in the U.S. is very acute, COVID-19 hospitalizations are above the previous April peak, while new positives tests per week have gone parabolic at over 150K.

Economies will continue to be hampered through the fall and winter as business shut downs reemerge. The graph below highlights the crash in economic activity throughout Europe.

Governments will continue to spend to cushion the economic damage, while central banks will continue to print money.

This is a very bullish backdrop for gold, silver and bitcoin. However it seems that only Bitcoin got the memo!

Bitcoin rose 8% last week, breaking through $16K as it marches again towards $20K.

Copper Surge to 2-Year High on Chinese Economic Data

Late Sunday evening copper rose over 2%, surging to a 2-year high on the back of strong Chinese economic data. Industrial output (+6.9% in October) and fixed-asset investment (+1.8% for the first 10 months of 2020) both beat consensus expectations.

Sierra Metals Delivers Record Setting Q3 2020 Results

Copper miner Sierra Metals (NYSE:SMTS, TSX:SMT) released stellar Q3-2020 results on November 9th.

The company delivered record-setting production and profitability results in Q3 despite the volatile COVID-19 operational environment.

  • Record quarterly production of 35.2 million pounds of copper equivalent production (up +9% y/y)
  • Record EBITDA of $37.2 million (up +73% y/y)
  • Cash costs falling -23% year-over-year to $0.92/lb (copper eq. pounds)

On a valuation basis, Sierra Metals trades at a very attractive multiple versus its commodity peers (copper, silver and gold) at 1.0x forward price-to-sales (analyst consensus).

Vanadium: Largo Resources Posts Strong Q3 2020

Vanadium producer Largo Resources (TSX:LGO) also delivered strong Q3 2020 results last week and setting a record for vanadium produced in a quarter.

  • Revenue increased +14% year-on-year to $27.5 million.
  • Record vanadium production in the quarter to 3,092 tonnes, an increase of +5% year-on year.
  • Net income for Q3 2020 swung positive to $2.6 million from a loss of $6 million the previous year.

Largo Resources sits firmly in the 1st quartile of the vanadium cost curve and has the highest grade among its global peers.

The company noted the demand outlook for vanadium remains bright, driven by stimulus driven infrastructure spending and the development of clean energy applications.

A Tale of Two Pot Stocks: Trulieve vs. Aurora

As we highlighted in last week’s Navigator, Aurora Cannabis (TSX:ACB) was the most bid up stock last week on the back of Biden’s victory. The stock rose a whopping +137%, a head scratcher to say the least given the company has zero business exposure to the U.S.

Like clockwork, Aurora’s management team always issues shares whenever there’s a surge in Aurora’s stock price, this time was no different.

On Tuesday the company announced a $150 million share offering which sent the shares into a nose dive for the remainder of the week. Aurora ended the week down -28%.

Trulieve (CSE:TRUL) on the other hand had another strong week up 7%, no rollercoaster here, a strong U.S. cannabis that is poised to keep delivering exceptional results.

The company is set to announce Q3 results on Tuesday November 17th before market open.  Analysts estimate revenue to come in at $131 million, Trulieve has a stellar track record of beating consensus – the surprise on average has been 8%.

 

 

 

 

 

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Sierra Metals is a market awareness client of Capital 10X.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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Capital 10X gets down to the real money business, actionable financial insights for traders and investors. We analyze company earnings, interview management teams and help teach the fundamentals of financial analysis and options trading. Our mission is to hunt for genuine 10 baggers.
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