Narratives are currently in beta
ELKEM is a stock I`ve owned before, in fact it is one of the first companies I bought shares in when I began "investing" (speculating) in 2018. Back then I sold almost at the bottom in 2020, at a bargain basement price of around 12NOK per share, a classic mistake. Over the past few months I`ve kept a watch on the stock price, and have now taken a small position.
ELKEM is a cyclical company, which produces various chemicals, like silicon and silicones, which are crucial in the production of basic and advanced materials that drive the global economy. ELKEMs products are necessary in the production of high quality steel, aluminum, solar PV, batteries, concrete and more. It sells these products mostly in the European and Chinese markets.
As I see it, the market is forward looking but with a short term time horizon. Mr. market thinks in terms of the next quarter, or the next 3 years, not in terms of the next 30, 20, or even 10 years. I believe the company is now significantly underpriced compared to its long term value, based on average earnings over the next 10 years, and about to come out of the deep trough it has been in post-2022.
Much will depend on how the global economy develops in the 2020s and 30s. As I see it ELKEMs products will be absolutely essential in future decarbonization and industrialization, which will need to occur, giving the company a structural tailwind. You may come to a different conclusion.
Long term cyclically adjusted fair value: 30-40NOK per share. Based on an average future earnings of 2-4 Billion NOK per year over the next 10 years.
Let`s see how the thesis develops.
How well do narratives help inform your perspective?
