Merafe - the pot luck share


I call Merafe the pot luck share because the more pots and pans that get sold, the more  fortunate the company becomes; because the whole investment case for Merafe centers around stainless steel.

 Why?

Ferrochrome is the secret ingredient used in the production of stainless steel to make it shiny and corrosion resistant...and Merafe Resources Limited produces lots of it!

When there is robust global economic conditions, stainless steel demand soars pulling ferrochrome prices with it and that is the time as an investor you climb onto Merafe's coat tails and go along for the ride.

But one could argue that with COVID-19 and worldwide lockdowns, global economic conditions have been in the slumps. Why is stainless steel doing so well? Stainless steel does extremely well in consumer based economies, as it is used more in consumer products. With people staying at home, the last two years, there has been a higher demand and consumption  of goods. When an economy shifts to infrastructure or service centric spend, the demand for stainless steel wanes and adversely affects the financial performance of Merafe.

Owning Merafe shares is like a rollercoaster ride, it is a highly cyclical business - as with all commodity companies - their business models center around the underlying commodity they mine or produce...so timing your entries and exits in this share is paramount to maximise your returns. 

Here is my research into Merafe to gain further insights into this JSE listed small cap : 

Company overview of Merafe

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