BlackRock, the investment firm with over nine trillion dollars in assets under management, issued an alert to the investment community.
The company has uncovered a hidden opportunity. And it’s a sector that the Financial Star team has been covering on our readers’ behalf for a while now…
We were right in saying that it will soon attract investment giants. This should ultimately open a floodgate of funding for this critical megatrend – clean energy transition.
Here’s what we mean…
BlackRock went public with a warning of a severe lack of funding in this sector. The company noted a major gap in valuation, too. And it concerns the industry that provides all the critical materials to make a clean energy future possible.
Put simply, critical minerals companies are undervalued relative to the rest of the stock market.
Critical minerals suppliers are trading an average of 8.5x price to forward earnings. For comparison, the entire universe of companies from the S&P 500 index is trading at a multiple of 18.5x.
To reach average market valuation, critical mineral suppliers would need to gain about 118%. Blackrock sees that as a tremendous opportunity for its clients. After all, the company is in the business of making money and is unlikely to miss such an attractive setup.
The Core of This Opportunity Is THESE Companies
However, this observation doesn’t apply to any company working in the mining industry. Only those delivering the most critical minerals, such as copper, nickel, cobalt, lithium, and others, are in focus.
These metals are already driving the next industrial revolution, powering electric vehicles on the roads, renewable energy generation, storage, and transition.
Legacy commodities, such as thermal coal, crude oil, natural gas, and others, are unlikely to benefit from this momentum. The clean energy transition megatrend calls for switching from these carbon-heavy fuels to minerals that reduce overall pollution.
This is another reason Blackrock puts this megatrend on its investors’ radars. It realizes that leading nations will fund this energy transition no matter what to reach their pollution reduction targets.
In order to keep climate change under control, the world needs to reduce emissions by 45% by 2030. Failure is not an option here…
The only way to make it possible is to invest in the supply chain of critical minerals, starting from the very bottom. The mining companies working with critical minerals could see higher investment levels flow from both public and private sources.
Bloomberg New Energy Finance outlined the need for $200 trillion in investment to stop global warming. Such an inflow of new funds will be a massive boost for the sector.
Blackrock is likely to lead the charge, steering its investors toward one of the market’s most undervalued and promising sectors.
We believe this megatrend has years, if not decades, of potential. This massive level of support from BlackRock is a strong vote of confidence.
The most important thing is that we’re still in the early days of this megatrend. The sector is still underfunded and ignored by most outsiders.
This is likely to change.
Investors should pay close attention to the developments in this industry.
Thank you for your loyal readership,
The Financial Star team