All posts by The Golden Investor

Lynas Corp Ltd (ASX:LYC): Rare-Earth Opportunity

Back then China held over 95% percent of the rare-earth market, in the years following companies who suffered from the shortage increased their interest in rare-earth miners outside China. But because rare-earth mining is a cost-intensive and has a hefty impact on the environment there hasn’t been a great rise of rare earth mines outside China. In fact, Lynas holds a monopolistic position as the only big and viable rare-earth miner outside of China.

American Reliance on China

The last rare earth miner in the USA went bankrupt in 2015, therefore, the American government started an initiative to stimulate rare earth mining in the United States. Where the miners used to be pushed out of the United States because of the environmental issues and regulations coming with rare-earth mining, now afraid of losing the essential supply of rare earths, the sector is welcomed back into the United States.

This summer the Australian prime minister met with Donald Trump, discussing this issue since rare-earths are essential elements not only in electric vehicles and mobile phones, but also important for national defense equipment like night-goggles, weaponry and laser systems. That’s why in November last year Australia and the United States signed an agreement to collaborate on the supply of these critical minerals. Not long after, the U.S. Army allegedly had plans to fund construction of rare-earth processing facilities. Lynas has also announced its intention to build a heavy rare earth separation facility, which would be the only facility of its type outside China. Where one may be built in Texas, since Lynas and Blue Line entered into a memorandum of understanding last year to built a processing plant in a joint-venture in the United States. They are expected to be one of the contenders for this funding.

Malaysian Troubles

The position Lynas Corp (ASX:LYC) holds looks good, however, on the short term there is still volatility possible since Lynas is currently in dispute with the Malaysian government. Their billion-dollar processing plant in Kuantan allegedly had a buildup of toxic and radioactive waste in a landfill on their site. The Malaysian government set new waste removal conditions for their license to end this long running dispute. In September Lynas Corp got a 6-month extension of their operating license which is set to expire on 2 February this year, although it’s clearly visible that the Malaysians are done with all the waste being dumped in their country. To calm the Malaysians Lynas made plans to make an initial processing plant in Australia that could remove some of the low radioactive material before the shipping of the metals to Malaysia for further processing. In September last year Lynas signed an agreement with the city of Kalgoorlie to look at potential sites for this plant.

The Golden Investor thinks Lynas Corp Ltd (ASX:LYC) is on a good way to resolve their problems with the Malaysian government and is despite all problems and Chinese pressure making a profit. Moreover, they hold good odds to expand their business to the United States which will further increase their strength.

Disclaimer: The writer of this article holds Lynas Corp Ltd (ASX:LYC), this article should not be interpreted as investment advice or anything like that.

Beyond Meat (BYND): Beyond Its Value or Vegetarian Leader?

Fears of increasing competition raised since other companies are developing similar products for a lower price. This is the biggest fear for investors, Beyond Meat’s price for its sausages and hamburgers are 5 times that of regular meat. Also, companies like Nestlé (SWX: NESN), Tyson Foods (TSN) (a former investor in Beyond Meat) and Impossible Meat compete on the same market. One could argue that Beyond Meat (BYND) has a first movers advantage and tries to identify itself as significantly different. The truth however, is that Beyond Meat (BYND) hasn’t achieved this status yet and big companies like Nestlé (SWX: NESN) are breathing in their neck. In recent years the vegetarian food market has been growing and companies like Nestlé (SWX: NESN) are getting more and more interested in this future-proof market. Nestlé can profit of their internal economies of scale. And along with its tremendous lobbying, marketing possibilities and long ongoing relations with producers it can be real threat for Beyond Meat.

Currently the stock has a 10D SMA of 75,61 and is seemingly stable on the short term. But as pictured above, there are a lot of challenges ahead. But luckily there are some interesting developments. Recently Beyond Meat (BYND) and Impossible Food (which hasn’t gone public yet) started a fierce battle on the restaurant and fast-food market. KFC initiated a test with Beyond Meat, and Subway announced a Beyond Meatball test at 700 of its restaurants in the US and Canada. At the same time Burger King started selling the Impossible Whopper in all its restaurants. It is beginning to look like restaurants either choose Beyond Meat or Impossible Foods in their craving to grab a bite of this growing market. But this is only encouraging the Spartan-like battle which will only grow in intensity in 2020.

The Coca Cola Case

For now we’re seeing an interesting contest reminding us of the classic Coca Cola-Pepsi rivalry. These two brands differ themselves of basic cola brands based on their marketing efforts and slightly better taste. The main difference is that these brands are at max three times as expensive as the cheapest brand. Beyond Meat can be seven times as expensive as similar natural meat and its taste isn’t free of debate. The question is if Beyond Meat and Impossible Meat are able to really display themselves as a good alternative to real meat. We know marketing can make up for a threefold in selling price, but if they are able to fill the rest of the gap we still have to see. The rest of the gap should come from their lower environmental impact and healthy imaging. But we shouldn’t close our eyes to the increasing rate of fires in The Amazon due to the surging soy-demand. Pushing the problem to another part of the world isn’t the same as resolving it.

Disclaimer: The writer of this article holds Beyond Meat (BYND), this article should not be interpreted as investment advice or anything like that.

Clovis Oncology (CLVS): A Big Splash or A Burn of Cash?

The stock has been extremely volatile ever since, several days it was the most traded stock on Wall-Street. The borrow fee exceeded 100% during this period indicating that short-selling Clovis Oncology (CLVS) stock is an expensive business. The stock borrow fee amount depends on how difficult it is to borrow a stock, another indicator that people are holding onto their stock and are carefully watching further developments.

So we know Clovis Oncology is a hot item, but is it worth buying? Clovis has got interesting potential. It’s main drug Rubraca (Rucaparib) has now only been approved as a Ovarian cancer drug, but initial sales numbers aren’t as high as expected. The main driver behind the bullishness is a potential expansion for Rucaparib to be used against other cancers such as prostate cancer, this could create multi-billion dollar revenue and thus blockbuster growth. For now, Clovis Oncology is still a loss making stock, however it beat EPS estimates in November. It is interesting to see if they manage to get a bigger part of the market and gain further momentum ahead in 2020. Clovis could be an interesting candidate as potential growth stock and since the pharma industry has been actively buying out cancer drug developers we remain interested in the course of this stock. It’s a big risk, big return kind of stock, be aware of a bumpy ride ahead.

Disclaimer: The writer of this article holds Clovis Oncology (CLVS), this article should not be interpreted as investment advice or anything like that.

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