When looking at small-cap shares, it pays to look for factors and possible future events that dont appear to be baked into the price.
Today Im going to take a look at three companies that, on the face of it, dont have a lot in common. That could be true at the moment, but this could well change in a matter of weeks, bringing security and the potential of much improved earnings visibility, going forward. So lets take a deeper look.
Rare Earth Minerals
Rare Earth Minerals (LSE: REM) is a United Kingdom-based minerals investment and development company. Its purpose is that of the identification, development and mining of rare earth minerals.
Tesla Motors (NASDAQ: TSLA.US) designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components. It is headed by Elon Musk, an entrepreneurial designer, engineer and inventor. He is the driving force behind a number of companies and concepts.
With the stock trading at over 131 times earnings, there seems to be high expectations here.
Bacanora (LSE: BCN) is a Canadian-based mineral exploration company. The company is engaged in the exploration and development of industrial minerals in Mexico with a focus on borates and lithium. As we can see from the chart below, this recently listed stock has underperformed the FTSE 100, but seems to have rallied from lows seen at the start of the year.
In a similar vein to Rare Earth Minerals, the company doesnt make any money as a consequence, it is equally as hard to value as Rare Earth Minerals.
Putting It All Together
I would be the first to admit that this is a rather odd selection of companies, so whats the connection?
Well, Tesla is rumoured to be planning to unveil a new home battery, meaning that it will need more lithium to keep up with potential demand. Bacanora has a lithium project located in Sonora State, Northern Mexico, not a million miles from Teslas factory currently being built in Nevada. The additional lithium requirement could well mean large orders for Bacanora this, in turn would please management of Rare Earth Minerals, who have built up 15.4% in the company I wouldnt be surprised to see this rise further in due course.
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Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.