On Friday, Tesla’s CEO, Elon Musk, revealed that the long-awaited futuristic ‘Cybertruck’ is going to cost 50% more than his initial estimates.

New prices will start at $60,990, but many still worry about the car’s potential usefulness.

Tesla’s shares have been falling all week and are down 3% at the time of writing on Friday. That said, Tesla shares are up a bumper 117% year-to-date, paying testament to Musk’s pricing strategy across the Tesla fleet.

The truck was inspired by a car-turned-submarine from the 1977 James Bond movie “The Spy Who Loved Me,” said Musk.

Musk himself never hid his excitement about the car’s futuristic look and speed range.

The Cybertruck, he said, “can not only beat a Porsche 911 on the track, but it can also tow a 911 faster than the 911 can drive itself”.

When the design was first revealed by Tesla four years ago, many voiced their concerns about the car’s everyday usefulness and, therefore, its popularity on the market. Some refer to it as a comic-book car due to its futuristic design.

After that, responding to a major critique of the Cybertruck’s design—its practicality—Tesla presented a video demonstrating the truck’s superior towing capacity compared to a Ford F-350 diesel truck, as well as similar models from Chevrolet, Ram, and Rivian.

Following Musk’s 2019 projection of a $40,000 price for the Cybertruck, the vehicle garnered over a million reservations with $100 deposits.

Despite escalating raw material expenses for electric vehicles (EVs), Musk had not revised the price until Monday, announcing new deposits at $250. Analyst Paul Waatti from consultancy AutoPacific noted that the pricing was expected, anticipating the Cybertruck to resonate well with a more niche audience.

The FTSE 100 ticked higher on Friday as strong miners buoyed the index and took it briefly to the highest levels since mid-October.

London’s leading index was 0.6% to the good in mid-afternoon trade on Friday.

Miners soared as investors digested better-than-expected Chinese manufacturing data which raised hopes of improving activity in the world’s second-largest economy.

“Miners led the charge after Chinese manufacturing data beat expectations, raising hopes that the Asian superpower will require more commodities from the big natural resources companies on the stock market. The Caixin China General Manufacturing PMI index rose to 50.7 in November from 49.5 in October – a figure above 50 implies expansion and a figure below 50 is contraction,” said Russ Mould, investment director at AJ Bell.

On Friday, Anglo America, Glencore, Rio Tinto and Antofagasta were among the top risers. Anglo American stormed ahead with a 5% gain, and Antofagasta jumped 3.5%.

Housebuilders were in focus after Nationwide said UK house prices had increased for the third consecutive month amid a lack of supply.

However, early gains for Taylor Wimpey, Barrat Developments and Berkeley Group Holdings had subsided by the afternoon as investors considered the dynamics behind rising prices.

“This looks like a welcome bump for the market, but it’s not quite as positive as it seems. A dearth of homes for sale has put a floor under prices, which rose slightly during November. But life remains tough for sellers,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.

“Prices are on the up for the third successive month, which feels like good news. However, in order to get these higher prices, you have to actually sell your home – which is easier said than done. Sales have slowed to a crawl. October figures out this week from HMRC showed property sales were down a fifth in a year.”

Tesco was among the fallers after JP Morgan downgraded their price target to 230p from 240p. Tesco shares were down 1.8% to 280p at the time of writing.

Tesco shares fell on Friday after the supermarket’s price target was slashed by equity analysts at JP Morgan.

JP Morgan cut its price target to 230p from 240p sending Tesco shares to the bottom of the FTSE 100. Tesco shares were trading at 281p on Friday morning.

Tesco sales, excluding fuel, grew 8.9% on a constant currency basis in the first half of 2024FY, and adjusted operating profit rose 14%.

Pressure from the discounters is making the grocery market an increasingly competitive space, which risks a race to the bottom in terms of sacrificing margins to maintain market shares.

“Tesco was the top faller on the FTSE 100 after JPMorgan cut its target price to 230p from 240p. That knocked the supermarket’s share price by 1.8% to 280.6p and ended a rally in the stock which has been in motion since August. The company has gained market share this year but still faces intense competition,” said Russ Mould, investment director at AJ Bell.

It’s always darkest before the dawn. This is particularly relevant for two AIM-listed investment companies, Tekcapital and Cadence Minerals.

The interest rate tightening cycle has done AIM companies no favours, and some have been hit harder than others. Companies structured as investment companies, including Tekcapital and Cadence Minerals, are among the hardest hit.

Rising risk-free rates have dented the market pricing of investment vehicles holding privately held assets. This includes not only AIM-listed investment companies but also some of London’s largest investment trusts. Even constituents of the FTSE 350.

Many private equity investment trusts with a market capitalisation of over £1bn trade at a discount in excess of 35%.

These discounts are more pronounced in AIM-listed investment companies, and here lies the opportunity.

The disconnect between Tekcapital and Cadence Minerals shares and their respective underlying valuations, combined with the prospect of interest rate cuts in 2024, provide investors with potential multi-bagging returns over the next year.

The opportunity in these two companies sits nearly as much with the external macro environment and cyclicality of early-stage companies as it does with Tekcapital’s and Cadence Minerals’ business models. The macro environment is also a risk consideration for these companies over the next year.

While we have highlighted the disparities in the valuation of privately held assets and current market pricing, Tekcapital and Cadence Minerals hold both private companies and public companies listed to major global exchanges with clear and transparent pricing, this further strengthens the case for a rerate.

Tekcapital

Tekcapital has a portfolio of four technology companies with the market opportunity to improve the lives of millions of people.

Two companies, Innovative Eyewear and Belluscura, are listed on the NASDAQ and AIM, respectively.

MicroSalt is preparing for an AIM listing, and Tekcapital is likely waiting for more favourable market conditions to pull the trigger.

Autonomous vehicle safety company Guident is privately held, and there are no signs from Tekcapital that a listing is planned in the near term.

Tekcapital’s market cap is currently £13m compared to the portfolio’s net asset value of $53.1m as of 30th June. Equity analysts separately valued the portfolio at a similar level shortly after the release of the half-year results.

If the NAV were calculated today, it would almost certainly be lower due to declines in the underlying share prices of portfolio companies. That said, it wouldn’t be dramatically lower.

The case for Tekcapital sits in the rerating of underlying portfolio companies and the listing of MicroSalt, which will crystalise the value created in the low-sodium salt technology business. Tekcapital recently said MicroSalt had secured deals with top-tier customers, including one of the world’s biggest snack food producers.

There will be arguments for and against individual portfolio companies’ future potential.

To demonstrate the Tekcapital team’s ability to identify technologies with substantial commercial opportunity, we would highlight Belluscura’s multimillion-dollar orders and commitments, representing a step change in revenue generation.

This will likely filter through to Belluscura’s share price once their recent funding package is completed.

Indeed, Tekcapital recently said they saw multimillion-dollar revenue for each of their portfolio companies in the next year as they move away from being early-stage intellectual property-heavy technology companies to gaining significant market traction.

Should this be achieved, the $53.1m net asset value as of 30th June would be a distant memory.

Trading at 8p, Tekcapital has the potential to rally to many multiples of the current share price to move back in line with the current NAV, let alone the potential future NAV of their portfolio companies as they factor in further commercial success.

Cadence Minerals

Cadence Minerals is a mining investment company with holdings providing exposure to iron ore, lithium, and rare earths.

Like Tekcapital, it trades at a significant discount to its holdings’ NAV. However, Cadence Mineral’s potential to multibag in the coming year rests with one individual portfolio holding, the flagship Amapa iron ore project.

Equity analysts at Edison Research recently attributed a 23.9p valuation to the Amapa iron ore project by itself. This compares to the 6p share price Cadence Minerals currently changes hands for.

The Amapa iron ore project located in Brazil was once valued at over $600m by Anglo American. Cadence Minerals has a 32% stake in the asset and has an option to increase its holding.

Cadence is currently working towards bringing the mine back into production and pursuing the necessary permits and licenses to do so. The company was given a boost earlier this year after announcing the acceleration of an operational license, which shortened the issuing time from 36 months to around 12 months.

As is typical of mining projects, investors will likely become increasingly interested in Cadence as production at Amapa nears.

The project benefits from an existing railway line and port, meaning the capex required to start producing iron ore is significantly lower than it otherwise would be.

Cadence has recently entered into an MoU with a party to explore the financing of the Definitive Feasibility Study and eventual mine construction.

In addition to Amapa, Cadence has notable investments in lithium companies Evergreen and European Metals Holdings. Cadence also has a stake in ASX-listed Hastings Technology Metals. The sum of these investments totals very roughly £5m.

With a market cap of £11.3m, this would mean the market is attributing a value of circa £6m to Amapa. The Pre-Feasibility Study released by Cadence Minerals in January 2023 gave the Amapa project a $949 million Net Present Value and $2.96 billion profit before tax over the life of the mines.

Sentiment around junior mining assets soured during the interest rate hiking cycle, hence the low valuation of Cadence Minerals. This can turn on a dime.

The FTSE 100 gained on Thursday as higher oil prices helped BP and Shell contribute a significant number of points to London’s leading index.

BP shares were 2.9% at the time of writing, while Shell added 1.7%. After a slow start to the week, the FTSE 100 was playing catch up with global equity indices that have so far produced notable gains driven by interest rate hopes.

The FTSE 100 was up nearly 1% shortly before 2pm on Thursday.

OPEC+ are meeting to discuss supply quotas with early reports suggesting they will commit to a 1 million barrel per day production cut. Brent oil was up 1.3% to $84.25 at the time of writing.

The FTSE 100 has been held back this week due to its weighting to commodities and global financial institutions that won’t share in the benefits of lower interest rates hinted at by US central bankers.

The S&P 500 has had a comparatively better week and is set to close the month with its best performance of the year so far.

“US indices are on course to chalk up their best month of the year in November. Data points and commentary from the Federal Reserve have largely reinforced the idea that the current rate hiking cycle is at its end,” said AJ Bell’s Russ Mould.

“It now feels like the market is waiting for the next big kicker to push it higher with forthcoming US jobs figures, inflation readings and central bank meetings as potential catalysts.”

US bond yields continued to fall on Thursday, providing additional support for US stocks, which were set to open higher. High-profile investors are betting on a rate cut in q1 2024, much sooner than the current expectation of June 2024.

Anything that fuels the fire of speculation around interest rate cuts sooner than market pricing will be supportive of equities, although it may not be overly helpful for the FTSE 100’s big banks, such as HSBC and Standard Chartered.

Risk on rally

There was a clear risk-on rally underway on Thursday, demonstrated by the positioning in FTSE 100 shares.

Miners, banks, and housebuilders rallied while utilities and consumer staples slipped. Severn Trent was the biggest faller as the company traded ex-dividend.