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2021 dogs of the ASX: are they the bargains of 2022

chart of loser stocks from 2021 on the ASX

The S&P/ASX 200 closed up on Thursday, gaining 22.80 points, or 0.31%, to 7387.60. Over the past five days, the index has gained 1.26%. Syrah Resources jumped by 23% before going into a trading halt to assist with continuous disclosure related to the Tesla deal announced earlier in the day (see below for more details).

TESLA

Syrah Resources has an offtake agreement with Tesla to supply natural graphite Active Anode Material (AAM) from its US production facility in Vidalia.

The company says Tesla will offtake the majority of the proposed initial expansion of AAM production capacity at Vidalia at a fixed price for an initial term of four years

Tesla also has an option to offtake additional volume from Vidalia subject to Syrah expanding its capacity beyond 10kt per annum AAM.

Tesla shares rallied 6% in New York trading after its billionaire chief executive Elon Musk said in a podcast interview that he had probably "sold enough" stock in the electric carmaker.

The latest regulatory filings showed Musk recently sold a combined $853.7m worth of shares, Bloomberg reports. That takes the total to 13.8m since he first asked his Twitter followers in November whether he should offload a 10 per cent stake.

"I sold enough stock to get to around 10% plus the option exercise stuff and I tried to be extremely literal here," he said in an interview with Babylon Bee.

On average, the worst performers in the S&P 500 in the last 20 years have outperformed in the first quarter of the next year, a sign many dogs are destined for a rebound, writes The Australian Finacial Review.

RIO TINTO

Rio Tinto is delivering on its promise to build a battery-materials business to align its portfolio with the energy transition with a deal to buy a lithium project in Argentina for $825 million, according to Adrià Calatayud at Dow Jones Newswires.

The acquisition of the Rincon project should increase the mining company's exposure to battery metals, reduce its reliance on iron ore in the long term, and bring geographical diversification to its lithium portfolio. Rio Tinto is the first major mining group to invest in lithium. BHP and Vale are exposed to battery metals through their nickel assets, but don't have lithium projects.

The deal in itself might be too small to move the needle for Rio Tinto, with a price tag that represents around 1% of the group's market capitalization, but it signals a direction of travel. Rio Tinto in July said it had committed $2.4 billion to Serbia's Jadar lithium-borates project and expects first saleable output in 2026. It also has a project in California where it began producing battery-grade lithium from waste rock in April.

Those projects, along with its more significant copper assets which already accounted for 9.7% of Rio Tinto's underlying Ebitda in the first half of 2021 should help it mitigate potential long-term challenges in its iron ore business, where the group generated 76% of underlying Ebitda in the first half.

Jefferies analysts recently said structural changes in the China's economy should shift demand toward energy-transition metals like copper and away from iron ore and coal.

COVID

NSW has recorded 5715 new cases of Covid-19 in the 24 hours to 8pm last night and one death. Victoria’s Covid-19 cases have surged to 2005 with 10 deaths.

Pfizer has received the US Food and Drug Administration's go-ahead on the emergency use of its Covid-19 pill, adding another tool to the worldwide battle against the pandemic.

AstraZeneca and Oxford University have started developing a version of their coronavirus shot that targets omicron, as researchers study the efficacy of existing vaccines against the latest variant.

China on Wednesday ordered the lockdown of as many as 13 million people in neighbourhoods and workplaces in the northern city of Xi’an following a spike in coronavirus cases.

BROKER NOTES

UBS initiates coverage of PEXA with a Buy rating and $20.60 target

Link Administration cut to Neutral at JPMorgan

Link Administration cut to Hold at Morgans Financial

Lovisa initiated with $21.25 a share price target at UBS

Mount Gibson Iron price target cut 13% to $0.70 a share at Macquarie

Poseidon Metals raised to Speculative Buy at Morgans Financial

US ECONOMY

The US economy grew at a 2.3% rate in the third quarter, slightly better than previously thought, the Commerce Department said Wednesday. But prospects for a solid rebound going forward are being clouded by the rapid spread of the latest variant of the coronavirus.

The third and final look at the performance of the gross domestic product, the nation’s total output of goods and services, was higher than last month’s estimate of 2.1% growth.

The new-found strength came primarily from stronger consumer spending than what was previously thought, as well as businesses rebuilding their inventories more than initial estimates revealed.


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