Weekly Update: Saxo Thematic Investing Performance

Energy storage: higher energy costs complicates the transition

The green transformation has more political capital behind it than ever as the European continent is set to replace its dependence on Russian energy in the years to come. But higher primary energy costs are complicating the transition making everything in manufacturing more costly. One of the companies in the energy storage basket that is under pressure from higher energy costs is Varta announcing last week that it is withdrawing its fiscal outlook for 2022 as rising raw materials and energy costs are making the business of energy storage products unpredictable. Varta’s share price was down 38% last week. The only reason why the energy storage basket is not down more last week is because the basket contains lithium and cobalt miners which are doing well due to high prices on these two metals as supply continues to be lower than demand.

Defence: Russia’s mobilization lifts European defence stocks

Russia’s decision last week to mobilize its reserves to drastically increase its manpower in its war in Ukraine has increased the stakes in the war and also the demand for more weapons to Ukraine. Our defence basket was the best performing basket last week down only down 3.3% with the German military company Rheinmetall being the best performing up 6.9%. Analysts remain bullish on Rheinmetall with revenue set to increase from €5.7bn in 2021 to €9.7bn in 2025 as the EU is expected to significantly increase its military spending. It could very well be that the current growth estimates are too low depending on the future outcomes in the war in Ukraine.

Today we are also updating our defence basket by removing Ultra Electronics a UK-based defence and security company that has been bought by Cobham back in August. The new stock in the basket is Hensoldt which is a German military technology company which offers solutions across space, air, land, sea, security, and cyber.