If you’re looking for exposure to rare earths, then there are a couple of quality options for you to choose from on the ASX 200.

These are Iluka Resources Limited (ASX: ILU) and Lynas Rare Earths Ltd (ASX: LYC).

Which rare earths producer should you buy?

The team at Goldman Sachs has been looking at the industry and has given its verdict on the two companies.

According to the note, the broker believes investors should buy Iluka over Lynas at this point in time.

Goldman has a conviction buy rating and $14.00 price target on Iluka’s shares. This compares to the current Iluka share price of $12.43.

As for Lynas, this morning the broker initiated coverage on the company with a neutral rating and $9.50 price target. This is a touch lower than the current Lynas share price of $9.69.

Goldman commented: “We prefer ILU (Buy, on CL) over LYC (Neutral) for Rare Earth/NdPr exposure based on valuation. Factoring in our long run NdPr price of US$80/kg, our price target on LYC offers 2% downside.”

Why Iluka?

The broker is bullish on Iluka due to its attractive valuation and compelling minerals sands and rare earth growth potential.

The broker said: “We think ILU is undervalued (on c.5x EBITDA) vs. key rare earth (c.15x) and mineral sands/pigment (c.6x) industry peers.”

“We are positive on ILU’s project pipeline and forecast >40% production growth in mineral sands volumes, c.18ktpa of Rare Earths (~3.5-4ktpa of high value NdPr), and a >50% increase in EBITDA over the next 5 yrs to 2026.”

In addition, Goldman highlights that rare earths are in high demand from end users and this is expected to remain the case for some time thanks to their use in renewable energy and electric vehicles.

It said: “NdPr market to remain in deficit beyond 2025 based on our NdPr SD model incorporating our global 2030 wind & EV targets and ex-China mine supply forecasts. Current NdPr spot China is ~US$135/kg.”

All in all, this could make Iluka shares worth considering if you’re looking for exposure to the resources sector or rare earths.

The post Should you buy Iluka or Lynas shares for rare earths exposure? appeared first on The Motley Fool Australia.

More reading

• Lynas share price lifts amid record quarterly result
• The Lynas share price has rocketed 50% in six months. Can it keep rising?
• Top brokers name 3 ASX shares to buy next week
• These were the worst performers on the ASX 200 last week
• Why is the Lynas share price backtracking 5% today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Tuesday, the S&P/ASX 200 Index (ASX: XJO) was out of form and dropped into the red. The benchmark index fell 0.4% to 7,454 points.

Will the market be able to bounce back from this on Wednesday? Here are five things to watch:

ASX 200 expected to edge lower

The Australian share market looks set to edge lower on Wednesday following a poor night in the US. According to the latest SPI futures, the ASX 200 is expected to open the day 3 points lower this morning. On Wall Street, the Dow Jones fell 0.25%, the S&P 500 dropped 0.35%, and the Nasdaq tumbled 0.3%. Inflation concerns weighed on investor sentiment.

Oil prices jump

Energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a great day after oil prices jumped. According to Bloomberg, the WTI crude oil price is up 6.8 % to US$100.75 a barrel and the Brent crude oil price has risen 6.4% to US$104.76 a barrel. This follows the easing of lockdowns in Shanghai and OPEC warning that it would be impossible to replace potential supply losses from Russia.

EML takeover rumours swirl

The EML Payments Ltd (ASX: EML) share price will be one to watch this morning amid rumours the payments company held takeover talks with private equity firm Bain Capital. According to the AFR, the two parties ultimately failed to agree on a deal after a period of due diligence. EML is currently one of the most shorted ASX 200 shares with short interest of 9.5%. Those short sellers may have dodged a bullet on this occasion.

Gold price rises

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a decent day after the gold price pushed higher. According to CNBC, the spot gold price is up 1.1% to US$1,969.1 an ounce. The gold price was given a boost from a US inflation reading that was the highest in four decades.

IDP remains a buy

The IDP Education Ltd (ASX: IEL) share price could be a top option for investors according to Goldman Sachs. This morning the broker retained its buy rating and lifted its price target on the student placement and language testing company’s shares to $35.50. Goldman notes that international student visa data shows the recovery is underway in Australia.

The post 5 things to watch on the ASX 200 on Wednesday appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX shares today
• What was the highest ever AGL Energy share price?
• 3 ASX 200 shares sliding to 52-week lows on Tuesday
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• How is AFIC different from an ASX 200 ETF?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended EML Payments. The Motley Fool Australia owns and has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) may have fallen 0.42% today, but these shares were not holding it back. Three ASX mining shares skyrocketed on the ASX today after new discoveries.

Let’s take a look at why these shares had such a good day.

Krakatoa Resources Ltd (ASX: KTA)

The Krakatoa Resources share price exploded a massive 95% on a rare earth discovery at the Mt Clere project in Western Australia. Krakatoa found widespread clay hosted iconic rare earth element mineralisation. Rare earths are critical components in electric vehicle (EV) batteries. Commenting on the news, Krakatoa CEO Mark Major said:

This discovery has come at a great time for the company and our shareholders. Demand for these magnetic and critical rare earth elements are expected to increase over the next ten years, as the world embarks on the electric revolution.

Ragnar Metals Ltd (ASX: RAG)

The Ragnar Metals share price surged a whopping 65.65% on the back of drilling results. The company reported promising assay results at the Tullsta nickel project in Sweden. Diamond drilling intersected with nickel, copper, and cobalt, including a high grade zone at 34m.

Anax Metals Ltd (ASX: ANX)

The Anax Metals share price surged nearly 55% in intraday trade before retreating back to 10.5 cents, an 8.25% gain. Anax reported “spectacular” drilling results at the company’s Whim Creek project in Western Australia. Massive copper and zinc sulphide mineralisation was discovered up to 15m wide. Final assay results are still on the way.

The post 3 ASX mining shares skyrocketing on major new discoveries appeared first on The Motley Fool Australia.

More reading

• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why Iress, Krakatoa Resources, Paradigm, and SE Advanced Materials are pushing higher
• Krakatoa Resources share price explodes 95% on major discovery
• Here are the 3 most heavily traded ASX 200 shares on Monday
• These were the worst performers on the ASX 200 last week

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Shares of Nickel Mines Ltd (ASX: NIC) continue to trace south after suffering heavy losses in late March, amid the now infamous nickel squeeze.

The short squeeze on nickel produced a ripple effect the likes of which hadn’t been seen since Covid-19 first appeared in 2020.

What’s happened since?

For nickel players, the outcome of the market calamity has been mixed. A good portion of players absorbed the fallout well.

Those who had an association with Tsingshan, and its subsidiary Shanghai Decent (the nickel giant behind the squeeze), not so well.

For Nickel Mines, that’s exactly the case. “Shanghai Direct is the company’s biggest shareholder, with an 18% stake, and also partners with Nickel Mines on two of its nickel pig iron operations,” TMF reported at the time, after confirmation by Nickel Mines in an announcement.

As the fallout continued, investors soon realised there could be real risk tied to the company’s solvency.

“Management assured investors all deal covenants remain in place and there should be no fallout from the events,” TMF said.

“It doesn’t appear to have worked – investors are offloading shares at pace today such that trading volume is 300% above its four-week average in today’s session.”

The Nickel Mines shares price has since plunged from a high of $1.65 near the time of the saga to now trade 25% lower at the time of writing.

Moody’s Investor Service also downgraded Nickel Mines’ senior unsecured debt in late March from stable down to negative, per Bloomberg reporting.

“[The] negative outlook reflects the increased risk and uncertainty for the company’s ongoing credit profile, given the recent issues facing its sole offtaker, Tsingshan,” it reported. t also went onto say:

While the negative outlook reflects the increasing concerns around Nickel Mines’ reliance on Tsingshan, the affirmation of the ratings considers its steady operating profile, with strong margins and cashflow supported by its competitive cost position and elevated nickel pig iron prices.

The Nickel Mines share price is now down 2% for the last 12 months and has dipped 13% this year to date.

The post How has the Nickel Mines share price been performing since the big squeeze? appeared first on The Motley Fool Australia.

More reading

• All that glitters isn’t gold: Here are the worst performing ASX mining shares of the quarter
• These 3 ASX 200 shares are topping the volume charts on Wednesday
• These were the worst performing ASX 200 shares in March
• The US is backing Aussie critical minerals projects, and these ASX mining shares could be set to reap the rewards
• Here are the 3 most heavily traded ASX 200 shares this Thursday

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Vulcan Energy Resources Ltd (ASX: VUL) share price closed lower today, finishing 1.33% in the red at $8.89.

It’s been a one-way affair for Vulcan shares over the last few months. Prices have trended downwards, reaching a low of $8.18 in February.

The lithium company recently signed an offtake agreement with German municipal energy giant MVV Energie AG for 240-gigawatt hours per year of renewable heat.

However, without any realised value until 2025, investors will have to wait a few years for the cash flow to pass through to the bottom line.

Is Vulcan a buy?

Vulcan has narrow coverage but, of the three analysts rating the stock, all have it as a buy and/or speculative buy, according to Bloomberg data.

Consensus from this list has the company valued at $19.07 per share – almost 115% upside potential.

In fact, discounting Berenberg’s price target of $14.20 a share, Alster Research and Canaccord Genuity value Vulcan at $20 and $23 a share respectively.

Alster recently noted Vulcan’s potential upside if Germany continues its push away from reliance on Russian energy imports. According to the broker:

Clearly, Vulcan would benefit from an increasing penetration of geothermal energy by streamlined regulatory procedures, as it would simultaneously help identify and develop the lithium deposits within the granted licenses.

Overall, we expect the conditions for Vulcan to receive a further impetus not only due to the conflict, but also due to the fulfilment of climate targets.

Meantime, long-duration stocks – those that deliver cash flows and returns in the distant future – have taken a beating in 2022.

Vulcan’s been no exception. It reported $631,542 in revenue for the 12 months to 30 June 2021, made up mostly of interest income and a tax incentive.

The company’s acquisition of the Insheim geothermal power plant in Germany allows Vulcan to book revenue on a forward basis. The company said, “it is anticipated [the plant] will be a source of revenue”.

Nevertheless, after some volatility, shares have traded mostly sideways over the past three months and are down around 12% in that time.

Towards the end of last year, Vulcan settled a legal dispute with short-selling firm J Capital Research USA. The latter accused Vulcan of producing faulty economics at its geothermal-lithium plant in Germany, sparking a fierce legal battle.

As a result of the court’s findings, J Capital is permanently restrained from “disseminating, publishing or republishing any matter of and concerning the company, and its directors and officers”, Vulcan said at the time.

J Capital managing partner Tim Murray also sent a letter of apology to Vulcan for its allegations regarding the company’s board and management team, according to various media reports in December last year.

Vulcan share price snapshot

Over the past 12 months, the Vulcan share price has jumped 38% higher despite shedding 14.5% year to date.

The company has a current market capitalisation of $1.17 billion.

The post Why this broker says the Vulcan share price can more than double appeared first on The Motley Fool Australia.

More reading

• Vulcan share price up on new offtake agreement
• March was a stellar month for the Vulcan Energy (ASX:VUL) share price. Here’s why
• Vulcan (ASX:VUL) share price lifts amid company quest to replace Russian gas
• Experts name 3 of the best ASX lithium stocks to buy now
• Here’s why the Vulcan (ASX:VUL) share price is charging higher today

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Today, the S&P/ASX 200 Index (ASX: XJO) failed to keep its head above water, succumbing to the risk-off attitude in markets. At the end of the session, the benchmark index finished 0.42% lower at 7,454 points.

Turning our focus to the sectors, there was nowhere to hide on the ASX today. All 11 sectors were hit with the same hammer, taking the majority of companies inside the top 200 down a notch. Suffering the steepest falls were the tech and healthcare sectors. Meanwhile, a strong showing among some of the gold miners helped the materials sector avoid the worst of today’s punishment.

However, the question is: which shares delivered the biggest returns to investors on the ASX today? Here are the top ten stocks that came through for investors:

Top 10 ASX shares countdown today

Looking at the top 200 listed companies, Elders Ltd (ASX: ELD) was the biggest gainer today. Shares in the agricultural and rural services provider climbed 2.85% despite there being no announcements flowing through to shareholders. Find out more about Elders here.

The next biggest gaining ASX share today was renewable electricity supplier, Meridian Energy Ltd (ASX: MEZ). Though, this New Zealand-based company lacked any updates of its own as well today. For reference, the last price-sensitive announcement was on 15 March, which enclosed Meridian’s monthly report. Uncover the latest Meridian Energy details here.

Today’s top 10 biggest gains were made in these ASX shares:

ASX-listed company	Share price	Price change
Elders Ltd (ASX: ELD)	$13.73	2.85%
Meridian Energy Ltd (ASX: MEZ)	$4.52	2.73%
Uniti Group Ltd (ASX: UWL)	$4.80	2.56%
Bluescope Steel Ltd (ASX: BSL)	$21.26	2.51%
Evolution Mining Ltd (ASX: EVN)	$4.50	2.51%
Ebos Group Ltd (ASX: EBO)	$38.34	2.46%
James Hardie Industries Plc (ASX: JHX)	$40.67	2.24%
AGL Energy Ltd (ASX: AGL)	$8.58	2.02%
Iress Ltd (ASX: IRE)	$11.80	1.72%
Super Retail Group Ltd (ASX: SUL)	$10.57	1.44%

Our top 10 ASX shares today countdown is a recurring end-of-day summary to ensure you know which companies were making big moves on the day. Check-in at Fool.com.au after the market has closed during weekdays to see which stocks make the countdown.

The post Here are the top 10 ASX shares today appeared first on The Motley Fool Australia.

More reading

• What was the highest ever AGL Energy share price?
• 3 ASX 200 shares sliding to 52-week lows on Tuesday
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• How is AFIC different from an ASX 200 ETF?
• ASX 200 midday update: Pendal rejects takeover offer, Mineral Resources rises on broker upgrade

Motley Fool contributor Mitchell Lawler owns Elders Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Super Retail Group Limited. The Motley Fool Australia owns and has recommended Super Retail Group Limited. The Motley Fool Australia has recommended Elders Limited and Uniti Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Jindalee Resources Ltd (ASX: JRL) share price soared today amid demerger news.

After emerging from a trading halt, Jindalee shares gained 13% in intraday trading before closing at $4.75 each, a 9.2% rise. In comparison, the S&P/ASX 200 Resources Index (ASX: XJR) closed 0.19% lower today.

Let’s take a look at what is happening at Jindalee.

US lithium focus

The mineral exploration company will position itself as a pureplay US lithium developer working on the McDermitt Lithium Project in Oregon.

Jindalee will separate its Australian assets and list as NewCo on the ASX.

Eligible Jindalee shareholders will receive a pro-rata distribution of NewCo shares at the record date.

The company said a strategic review of Jindalee’s portfolio found separating its Australian assets would maximise value for shareholders.

Jindalee also wants to accelerate exploration and development at the McDermitt Lithium Project, one of the biggest lithium deposits in the US.

Commenting on the news, chairman Justin Mannolini said:

The time is right for Jindalee to reposition itself as a pure-play US lithium developer. The board believes that the favourable political climate in the United States following bipartisan expressions of support for the development of an integrated domestic lithium-ion battery value chain, coupled with the well-known electric vehicle thematic, create the ideal backdrop for the proposed Demerger.

The new company

Newco will focus on exploring nickel, gold, and lithium at projects in Western Australia and Tasmania.

The current Jindalee CEO, Karen Wellman, will lead the NewCo team in the position of managing director.

The company hopes to complete the demerger in the September quarter, subject to approval.

Jindalee share price snapshot

The Jindalee share price has gained 70% in the past year while it has soared 115% year to date.

In the past month, the company’s shares have surged 67% although they have fallen 28% in the last week.

For perspective, the ASX 200 Resources Index has returned nearly 17% in the past year.

Jindalee has a market capitalisation of $270 million based on its current share price

The post Jindalee share price rockets 13% on USA lithium demerger news appeared first on The Motley Fool Australia.

More reading

• Jindalee (ASX:JRL) share price rockets 18% on ‘huge lithium’ find

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The ASX has plenty of mining companies, but which one is the biggest mining share?

Readers may have heard of a number of different miners that produce different commodities such as BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG), Newcrest Mining Ltd (ASX: NCM), South32 Ltd (ASX: S32), Northern Star Resources Ltd (ASX: NST) and Mineral Resources Ltd (ASX: MIN).

The smallest on the list is Mineral Resources, an iron ore, lithium and mining services business. It has a market capitalisation of $11 billion according to the ASX.

There are some very large ASX mining companies on the ASX.

According to the ASX:

The Fortescue market capitalisation is $65 billion.

The Rio Tinto market capitalisation of $43.6 billion.

The BHP market capitalisation is $261 billion.

So, the winner is BHP.

Why is BHP so big?

The company produces a number of commodities through its assets including iron ore, copper, nickel, metallurgical coal, petroleum and potash.

It produces minerals in both Australia and the Americas.

To give a context of how much BHP is producing, in FY22 it’s expecting to produce between 1,590kt to 1,760kt of copper, between 249mt to 259mt of iron ore, between 38mt to 41mt of metallurgical coal and between 85kt to 95kt of nickel.

The ASX mining company has been making a lot of profit. In the six months to 31 December 2021, it revealed its ‘continuing operations’ numbers, which excludes the petroleum division it plans to divest. Continuing operations profit from operations was almost US$15 billion, while underlying attributable profit was US$9.7 billion. And that’s just for six months.

BHP has been raking in the cash thanks to the elevated commodity prices.

Investors can use those profit numbers to value the business at a multiple of the earnings.

According to Commsec, the BHP share price is valued at 10x FY22’s estimated earnings. While that is not a relatively high price-to-earnings ratio compared to many other S&P/ASX 200 Index (ASX: XJO) shares, it’s enough to give BHP a market cap of $261 billion.

How could the BHP business change in the future?

When BHP divests its petroleum business to Woodside Petroleum Limited (ASX: WPL), it will no longer own those assets and it won’t be entitled to that profit.

However, the ASX mining company will continue to own its iron ore mines and all the other assets. Plus, the business is working on expanding its potash asset in Canada – the Jansen project. This is planned to be the largest potash-producing mine in the world.

Potash is seen as a greener fertiliser. BHP points to the tailwind of a rising global population as to why it’s an interesting commodity that could see growing demand:

The global population is projected to keep rising in coming decades. That means more mouths to feed, more affluent diets and growing strain on a finite land supply.

BHP share price snapshot

Since the start of the 2022 calendar year, the BHP share price has climbed 22%.

The post What is the biggest mining company on the ASX right now? appeared first on The Motley Fool Australia.

More reading

• These are the 2 best ASX dividend shares to buy right now: fund manager
• ASX mining shares were the leaders last quarter. Here are the top performers
• BHP and Woodside one step closer in creating $40 billion energy giant
• If you’d bought $10,000 of BHP shares 5 years ago, here’s what you’d have now
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Tristan Harrison owns Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The phrase ‘highest-ever share price’ might not feel too comfortable for shareholders of AGL Energy Limited (ASX: AGL). After all, it’s been a long time since this ASX blue chip and old stalwart of the S&P/ASX 200 Index (ASX: XJO) has seen an all-time high.

At the closing bell today, the AGL share price is sitting at $8.58, up 2.02% for the day. To be fair, that is a substantial improvement from the share price of $5.10 that we saw only a few months ago. That was a new 52-week low for AGL at the time. But it was also the lowest share price AGL had traded at for at least two decades.

So at today’s numbers, AGL shares are now up a healthy 39% or so in 2022 so far. Saying that, the company is still down more than 11% over the past 12 months, and almost 50% from the lows we saw back in the COVID crash of 2020.

But let’s now take a look at AGL’s highest-ever share price.

When did AGL shares last hit a record high price?

AGL shares last peaked back in 2017. Before that, the company had been on an epic run, rising more than 50% between April 2016 and April 2017. Mid-April 2017 saw this company’s last share price peak. AGL hit an intra-day high of $28.47 on 11 April, its current all-time high. Its highest-ever closing share price came on the day prior, 10 April. That saw AGL shares close at $28.44 each.

Unfortunately, it has been downhill for the company ever since. At today’s prices, AGL shares remain down 70% from that high watermark. Of course, there have been some substantial dividends paid out since then that would blunt these losses somewhat. But not nearly enough to result in these losses being erased. And definitely not enough to make AGL a market-beating investment since then.

Now AGL is about to turn a new leaf with the planned upcoming demerger of its retailing and generation businesses, no doubt AGL investors will be hoping the next five years prove more lucrative than the past five have been. But, as always, we shall have to wait and see.

At the current AGL share price, this ASX 200 share has a market capitalisation of $5.66 billion.

The post What was the highest ever AGL Energy share price? appeared first on The Motley Fool Australia.

More reading

• 3 ASX 200 shares sliding to 52-week lows on Tuesday
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• How is AFIC different from an ASX 200 ETF?
• ASX 200 midday update: Pendal rejects takeover offer, Mineral Resources rises on broker upgrade
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Novonix Ltd (ASX: NVX) share price struggled today, closing 5.45% lower at $5.90. Whilst the spot rally in commodities has taken off in 2022, Novonix – a battery technology company – has slipped well into the red during that time.

The company’s shares are down 36% since trading recommenced in January, clipping a good portion of the gains the company earned in 2021. Novonix, therefore, sits among the laggards of 2022 in the metals and tech sector.

The $2.85 billion company – by market cap, Novonix hasn’t turned a profit yet – now trails the wider tech sector by a substantial amount in 2022.

What’s up with Novonix?

Growth-type shares have incurred heavy losses across the board in 2022 as the yields on long-dated government bonds spike to multi-year highs.

The impulse effect from these moves has ramifications for both growth and tech stocks, seeing as the value of their cash flows into the future is tied to these rates. Higher yields simply mean lower valuations.

Investors are quick to respond to the moves as well. Just have a look at the interplay between the yield on the Australian government 10-year note and the tech index since March 2021, around 12 months of trade.

Why this is important is that Novonix and the wider tech sector tend to move together. Not in terms of absolute returns, but in terms of relative direction.

This has certainly been the case with Novonix this year, as I’ve reported in the past. By mid-March, the company’s share price had already slipped 44% as the tech sector faltered.

Whilst there was a fair spread between the two last year, in more recent times, the correlation is abundantly clear. Shown below is the performance of Novonix and the wider tech sector from November, right about when Novonix first started to slip on the chart.

As government bond yields creep up, it appears as if the trend in capital outflows from tech indices has continued well into the new year. Tech shares suffered heavy losses last quarter, for instance.

Since we rolled into April, the tightness of this inverse relationship has been on full show. Bond yields are spiking amid a wave of macroeconomic forces and tech shares are tumbling further, as seen in the chart below, showing levels of each since April 4.

Not even an update regarding the company’s battery technology on 4 April was enough to help Novonix. Its share price has tumbled further since then, in almost direct alignment with the wider sector.

Despite the pressures, longer-term, Novonix is still up around 160% in the past 12 months and has seen a 15% gain in the last month of trade.

The post The Novonix share price fell a further 5% on Tuesday. What’s happening? appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: Pendal rejects takeover offer, Mineral Resources rises on broker upgrade
• Have investors fallen out of love with Novonix shares in 2022?
• Why is the Novonix (ASX:NVX) share price charging 6% higher?
• These were the best performers on the ASX 200 last week
• The ASX 200 just had its longest winning streak since 2017. What’s doing?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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