Markets & Metals Navigator (October 12, 2020)

Stocks and Precious Metals Push Higher, Led by Tech & Silver

Happy Thanksgiving and Columbus Day to our Canadian and American readers!

A stellar week for the market, with the Nasdaq up 4.2% and the S&P 500 up 3.8%; and it looks like we’re off to a good start this week with the markets pointing higher Monday morning.

Silver had an excellent week as well, up 5.8%; displaying it’s high beta characteristics versus gold which ended the week up +1.4%.

Green Metals in Focus: Vanadium

Capital 10X launched its new series ‘Green Metals in Focus’ last week with a primer on vanadium.

Capital markets have consistently underappreciated the fact that metals are the foundation of the green economy. These “green” metals include: copper, cobalt, lithium, vanadium and rare earth metals.

Vanadium is a strategic “green” metal with industrial applications that include: resource efficiency, fuel efficiency and battery technology.

Primary mine production (lowest cost) only represents 18% of global vanadium supply.

Globally there are only three primary vanadium mines:

  1. Campbell Pit – owned by Largo Resources (TSE:LGO)
  2. Vametco – owned by Bushveld (LON:BMN)
  3. Rhovan – owned by Glencore (LON:GLEN)

The Disconnect: Lithium vs. Tesla

There’s no question we are in the era of electric vehicles with massive build outs of manufacturing capacity globally.

Last week the federal government of Canada and the provincial government of Ontario announced that they would each invest $295 million to produce electric vehicles and batteries in partnership with Ford in Oakville, Ontario.

The metal is so critical to the production of EVs that Tesla secured mining rights for lithium in Nevada.

We believe there is a disconnect between the pricing for lithium and the share price of Tesla (as a proxy for global EV demand); lithium prices are at a trough after peaking in 2018 while Tesla share price is at all time highs in 2020.

if Elon is securing lithium so should investors, Capital 10X will be identifying opportunities in the coming weeks – stay tuned!

The Drought in Gold Discoveries

Octavio Costa from Crescat Capital highlighted this excellent chart highlighting the fact that there have been no new big gold discoveries in the last 3 years.

Capital 10X believes that small and mid-cap gold equities are attractive for exactly this reason, the large-cap gold miners simply don’t have the resources to replace their current production rates and will ultimately have to acquire assets.

Readers can review our detailed quantitative analysis of junior gold minors in January to screen the best positioned names.

U.S. Vice Presidential Debate Ignites Cannabis Stocks

U.S. cannabis stocks were having a mediocre week until the Vice Presidential debate between Kamala Harris and Mike Pence on Wednesday night.

Harris stated that said marijuana would be decriminalized at a federal level in the United States under a Biden administration;  and they would also expunge the criminal records of people convicted of marijuana-related offenses in the past.

U.S. cannabis stocks rallied 15% in the following two trading days, with Curaleaf (CSE:CURA) and Trulieve (CSE:TRUL) up 18% and 14% respectively.

The U.S. cannabis sector is one of the few sectors that will benefit significantly from a Biden victory.  Biden currently has between a 8% to 13% lead versus Trump according to Nate Silver’s statistical analysis site FiveThirtyEight.

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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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