Four Pick And Shovels Stocks

Umicore, SA (UMI.BRUMICFUMICY) is also well positioned for the boom in electric vehicles. It produces cathode materials for lithium-ion batteries and is a battery recycler. The electric vehicle boom is currently constrained by the supply of lithium-ion batteries and the supply of specialty metals (lithium, manganese, cobalt, and nickel) that go into their manufacture. The mining of many of these materials often takes place under exploitative and environmentally harmful conditions in poor countries. Although still a small portion of the battery materials market, Umicore’s recycled materials can claim a price premium based on battery manufacturer commitments to ethically sourced raw materials. Although still in their infancy, recycled content mandates like the one Europe recently passed will also play a role.

Finally, dry bulk shipping firm Scorpio Bulkers, Inc. (SALT) is repositioning itself to sell picks and shovels to the burgeoning offshore wind industry. Dry bulk shippers carry bulk unpackaged cargoes like ore, grains, coal, and metals. Scorpio is selling its dry bulk shipping fleet and using the proceeds to buy offshore wind turbine installation vessels. In addition, it is applying to change its name to better reflect its future business.  

While SALT’s first wind turbine installation vessel is unlikely to be delivered until 2023, I believe that the rebranding will allow the company to attract part of the flood of cash pouring into the clean energy space.  

It is also value priced. The company had 11.5 million shares outstanding, $1,429 million in assets, and $675 million in liabilities at the end of September 2020. It expects to write down the market value of its vessels by between $475 million and $500 million to reflect their true market value. That market value is also the price at which they are currently being sold. It has made nine announcements of ship sales since mid-November. Since the sales are ongoing, we can expect its write-down estimates to be reasonably accurate. After the sale of its vessels, its main assets will be easy-to-value cash and contracts to buy wind turbine installation vessels. After subtracting liabilities, Scorpio will be worth approximately $254 million to $279 million, or $22 to $24 per share. The stock is currently trading in the $17 to $18 range.

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Disclosure: Long VLEEF, UMICF, SALT, VEOEF

Disclaimer: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the ...

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