gold oil and moly outlook..........
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I definitely like the third pick:
Safe Havens and Exponential Growth''
Ian Fleming, Financial Advisor
Published: Thursday, September 14, 2007
After the meltdown in metals and mining stocks last month, analysts are questioning whether the bleeding has finally stopped.
Capital Market Analysts point out that metal prices are under pressure from technical selling, as evidenced by the large number of short positions on the London Metals Exchange. But it feels that fundamentals remain solid, with the markets in deficit and inventories at historically low levels.
"Absent a recession, metal prices are expected to remain very strong," analysts Selkirk Thomas and Hayden Miller wrote in a note to clients.
But what about the equities? In their note, the analysts point out that stocks have outperformed the underlying commodities in recent months as investors started to accept the "stronger for longer" pricing.
But they wrote that the recent sell-off has brought the stocks down from an historically high premium to net asset value of 28% to just 9% (based on forward curve prices). And FBC analyst Peter Black added that copper equities now trade at a 30% discount to "fair value."
So what to buy? Mr. Black wrote that copper equities in particular look enticing, as they have strong balance sheets and growth profiles, and are trading below 6.5 times 2008 earnings as a group. His top picks in the large-cap, mid-cap, and junior space are Freeport-McMoRan Copper & Gold Inc. (FCX-M), CGX Energy (OYL.U), and TTM Resources (TTQ), respectively.
Mr. Black is also bullish on gold, as he believes the metal's "safe haven" value will emerge once the panic selling ends. He points out that there has also been strong fundamental buying of gold from jewelry manufacturers when the price falls to US$650.
Mr. Black also points out that gold equities have greatly under-performed bullion this year, and are now trading at a 25% discount to forward curve valuations.
When asked about the juniors, Mr. Black felt that the juniors would suffer from a flight to quality. Speculative stocks will remain just that, 'speculative'. When asked about the recent pandemonium regarding NOT on the venture exchange, he reminded us that if you can filter the diamonds from the ruff, there are still some stocks waiting to be discovered that boast exponential potential. When asked if he foresees the next NOT on his radar, he replied there are no guarantees, and junior stocks making it big are few and far between. But he very much liked the potential of TTM Resources (TTQ ticker symbol) as it continues to deliver exceptionally high grade molybdenum drill results from what is becoming a world class molybdenum deposit in Northern British Columbia.