By most accounts, Tesla Inc‘s (NASDAQ: TSLA) much-hyped ‘Battery Day’ was a bit of a fizzer.
That’s what happens when investors build up overly optimistic expectations.
In this case, expectations had been running high following tweets from Musk that promised ‘insane’ developments in battery technology.
While new tech developments were presented, investors were clearly disappointed at the timeline. Musk announced that a new affordable car from Tesla, in the US$25,000 (AU$35,000) range, could hit the roads, but not for 3 more years.
The Tesla share price dropped 10.3% yesterday (overnight Aussie time). At time of writing, shares are down another 3.3% in afterhours trading.
But it was Musk’s comments on lithium and nickel that I believe should be of most interest to forward looking investors.
We’ll get back to that right after a look at the bubbling volatility and latest broad selloff hitting the United States and Aussie share markets.
“We’re going to have to see what happens”
In early afternoon trading the S&P/ASX 200 Index (ASX: XJO) is down 0.9%, after initially falling 1.6% within the first 15 minutes of the opening bell.
The S&P/ASX All Technology Index (ASX: XTX) — which tracks 50 of Australia’s leading and emerging technology shares — has lost twice as much, currently down 1.8%.
This follows the trend set by US shares yesterday, where the S&P 500 Index (SP: .INX) lost 2.4% while the tech-heavy NASDAQ-100 (NASDAQ: NDX) fell 3.2%.
Today’s slide in the ASX 200 comes after it gained 2.4% yesterday, its best day in 2 months.
These kinds of big daily moves will keep most short-term investors on edge, trying to judge which direction shares will head next. Which is why we Fools recommend taking the long-term view. This means ignoring the short-term volatility and holding onto (and buying more of) the shares you’re convinced offer value at their current prices.
But, if the daily ups and downs are losing you sleep, you may want to tune out from the financial news for while.
As Candice Bangsund, portfolio manager of global asset allocation at Fiera Capital Corp says, share market volatility could be with us well into November (as quoted by Bloomberg):
It’s a volatile trade right now because the market is trying to digest the incoming data, prospects for a vaccine — there’s a lot of moving parts. The re-emergence of volatility and more erratic trading conditions have been consistent with what we believe will be a choppy market environment between now and the US elections in November.
And, love him or hate him, US President, Donald Trump, will do what he can to drive shares higher. But he isn’t going to help smooth the share market waters. At least not if he loses a contestable election.
Asked whether he would willingly hand over the keys to the White House to Democratic presidential candidate, Joe Biden, Trump replied, “We’re going to have to see what happens.”
How’s that for a dash of uncertainty?
How Musk is moving these ASX miners’ share prices
Getting back to ‘Battery Day’, Elon Musk surprised many when he said lithium is a plentiful resource, with enough reserves in the US to meets all its electric vehicle needs. “It’s important to note that there is a massive amount of lithium on earth. Lithium is not like oil; there’s a massive amount of it pretty much everywhere.”
And when Musk talks, investors listen.
The Lithium Australia NL (ASX: LIT) share price is down 3.6% in intraday trading. The Pilbara Minerals Ltd (ASX: PLS) share price is down 5.8%. Galaxy Resources Limited (ASX: GXY) shares are down 9.3%. Most of the other lithium focused miners are seeing heavy selling today as well.
But Musk had a different opinion on nickel, which he feels is in short supply.
His concerns haven’t sparked a rally in most ASX nickel shares yet. But quality nickel shares may be something to consider adding to your portfolio. There are a number out there to choose from.
Like Nickel Mines Ltd (ASX: NIC). The Nickel Mines share price is also sliding today, down 1.1%. But shares are up 7.1% year to date, and up 125% since 17 March after rebounding from the COVID driven market rout.
Looking beyond nickel, John Forwood, portfolio manager at the Lowell Resources Fund, has his focus squarely on copper shares. As quoted by the Australian Financial News, Forwood says:
The way we really like to play the electrification theme – all the charging stations, the cars themselves – require a lot more copper. So that’s probably the safest bet. Rather than trying to pick battery chemistry – is it going to be cobalt, is it going to be titanium, is it going to be tin or zinc or whatever. Every month, there’s a new battery chemistry that gets touted.
As with nickel, there are a number of quality copper miners listed on the ASX.
Sandfire Resources Ltd (ASX: SFR) is one to consider. Sandfire owns the DeGrussa copper mine in Western Australia, which also produces gold as a by-product.
The Sandfire share price is down 0.5% today. And it’s still down 29% in 2020, having yet to fully recover from the big selloff in February and March.
Since its 23 March lows, the Sandfire share price is up 49%.
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Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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