Markets & Metals Navigator: EV Boom, Green Metals & Psychedelics

Global Stock Market on Path Towards $100 Trillion

The total market cap of all global stocks is breaking through all time highs on the pathway to the $100 trillion mark. The exuberance is driven by solid vaccine trial data and the world awash with liquidity from central banks.

The recent push has been led by emerging markets, the iShares MSCI ETF (NYSE:IEMG) was up 2.8% last week and is now up 11.8% year-to-date.

The graph below is perhaps one of the best at explaining the explosion higher in the stock market and why there could be much more upside on the table; it compares the growth in money supply y/y over nominal GDP y/y growth  vs. the change in the S&P 500 PE ratio y/y.

We are currently sitting at an extreme level of ‘excess liquidity’ vs. any other point in time.

Store of Value Assets Sell Off Last Week, Bitcoin Rebounds Hard and Hits an All Time High

Last week we clearly saw the market rotate out of ‘safety’ and firmly into ‘growth’; Bitcoin, gold and silver fell -6%, -4% and -5% respectively.

However since the weekend Bitcoin has had a strong rally off its lows and is up over $19,540 – an all time high.  The Bitcoin market got a positive news jolt on Sunday morning when Guggenheim Partners announced that it was reserving the right for its $5.3 billion Macro Opportunities Fund to invest up to 10% of its net asset value in the Grayscale Bitcoin Trust (NYSE:GBTC).

Gold and silver continue to go unloved relative to their digital peer Bitcoin, we fundamentally believe this is a mismatch and that all three assets should directionally move in the same direction.

There are three key reasons all store of value assets should be well bid structurally:

  1. With bond yields heading to zero globally the opportunity cost of holding gold, silver and bitcoin is negligible.

2. Gold has a high correlation to real yields, there is significant divergence between gold and real yields – we don’t believe that is a sustainable disconnect.

3. The total assets of the Federal Reserve continue to balloon, this is bullish for all store of value assets.

Green Metals are the Value Play on the EV Boom

Last week Capital 10X highlighted the unprecedented boom in electric vehicle stocks post the U.S. presidential election.

The group of 15 EV stocks are up over 70% since November  the 3rd.  Most of the companies are not anticipated to have sales in 2021, and those do have sales trade on high multiples – ranging from 12x for Tesla (NASD:TSLA) to 58x for Blink (NASD:BLNK).

Green metals stocks have also performed well over the same period however the big difference is that these stocks are generating revenue and cash flow today.  For example on a forward price-to-sales basis, Sierra Metals (NYSE:SMTS, TSX:SMT) and Largo Resources (TSX:LGO) trade on 2x and 4x respectively – a big discount relative to their green electric vehicle peers.

We believe green metals are the strategic play on the green economy, it is where the bottlenecks are in the supply chain and where pricing power exists.

Copper on Full Throttle

Capital 10X has been pounding the table on the copper call this year, we believed there was a superior risk reward proposition.  The breakout is now in full throttle as the copper inches towards $3.50/lb.

Institutional investors are beginning to understand how critical copper is to an EV future and the fundamental leverage to economic recovery.

Additionally copper inventories remain very tight with 11 days of consumption currently warehoused.

 

Psychedelic Breakout: Compass Pathways

In the November 20th edition of the Capital 10X Navigator we highlighted the opportunity in Compass Pathways (NASD:CMPS) as one of the most legitimate entrants in the psychedelics arena.

The company is currently in FDA phase 2B studies using psilocybin capsule extracts in combination with psychotherapy to treat major depression disorders – specifically treatment resistant depression.

Grizzle believes the fundamental value of Compass Pathways is $210 based on a 15% U.S. market share to address treatment resistant depression.

Compass Pathways had a big break out last week, rallying over 40% – ending the week at at $47.50.  The stock is now 80% higher than its $17/share IPO price.

Psychedelic Insights: Mindset Pharma

Capital 10X sat down with James Lanthier CEO of Mindset Pharma last week to discuss the structural opportunities for psychedelics to address the mental health crisis. James provides us a background of the company and how their intellectual property driven business model sets them apart from other firms in the psychedelics industry.

 

 

 

 

 

 

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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