NOTE TECK IS THE ONLY MINING STOCK I AM SHORT IN ASUMMARY OF POSITIONS AND OUTLOOK
""here is a very interesting article. It points to some market trouble after this "rally," in summary that the stock market has priced in a recovery, particularly in the US, but only problem is its before any real recovery (earnings or profits) has actually happened.
The relevant chart here is the PE (price to earnings ratio) chart. The implied returns (after considering compounding) from these rocketing PE numbers are sub 3% for PE = 20+ and sub 1% for PE = 40+, that are of course horrible numbers, and less than GICs or govt bonds usually yield. (risk free savings)
In other words, the stock market (at least US ones) are not worth risking your money in. You would almost certainly better off forgoing the 1% return and keeping your principal. This would seem to correlate to the "almost free" prime lending rates being seen in North America.
This is what creates the large pressures of inflation. Money has little value to hold, so "real" things like real property, metals and other natural resources, especially gold and precious, non-paper assets appreciate relative to the currency. Of course everyday things like food, gas, and goods go along for the ride as well.
However, as with anything take this article with a "grain of salt," no one can predict the future, and we are in highly uncertain and volatile times, with little clarity, and many "laws of economics" seemingly defied. Some behaviours in the market however do follow "natural" or historical trends and relationships, and its has held true in this past year of market chaos. The relevant topic here, is that gold stocks generally go up when either the economy goes down or inflation gets high or out of control, and vice versa.
So what can you do, stay out of the market altogether ? The answer is a certain type of stock that can provide a natural hedge, to things going either way, up or down, and offers protection to inflation. These are mining plays exposed to both gold and copper, in relatively similar value proportions of both metals.
If the bearish prediction on the economy is wrong, copper price increases along with profits of the stock. If bullish predictions are wrong, then gold price escalates along with the profits of the company. If inflation gets out of control, gold price appreciates and maintains your "purchasing power" of invested funds at ~par.
Arguably, with what the markets have seen lately, copper can benefit from severe inflation as well, however the benefit is questionable, as to what has the greater effect, copper profit margins, or greater cost of producing the metal.
FYI here are some stocks I follow closely, analyze and model (and of course I own and believe in), mostly but not all, are mining stocks, so of course does not represent a balanced portfolio of any kind but more of a "risk+return+rated" one.
Picks heavily weighted in gold, and the "copper + gold plays" I've described. With the coming fall out from loose Gov't monetary policy in N.A. and pending inflationary pressures that are already being realized, the case for each is strong.
All stocks trade on the Canadian exchange in Toronto:
LONG POSITIONS:
strength = management, great upside, production growth, best copper multiples @ $2 in the mid cap range, No real DEBT, good gold copper mix mid-near term with new project at Prosperity.
strength = management & growth potential and performance history - they always seem to deliver on promises & results, NO real DEBT, good gold copper balance.
strength = management & growth potential, LOW DEBT, great gold multiples @ ~$3, again gold with strong copper
strength = pebble - largest (if not one of), undeveloped gold / copper reserves in the world at one mine: $300,000,000,000 estimated value of metal in the ground at todays prices. No BS ! For those who dont know mining, this equates to economies of scale on another level compared to average mining companies.
www.pengrowth.com PGF.UN
strength = solid double digit dividend history natural gas trust, great upside, environmental play with coal and nuclear energy always under scrutiny. also inflation hedge diversification for gold "non-beleivers".
strength = massive low cost "sustainable" gold producer and potential take over target
great gold growth story = undervalued
After merger with Petrocan, creates a mega-energy powerhouse with global presence, $60 Billion company one of largest in Canada, and N.A. another alternative for inflation hedge diversification for gold non-beleivers, as oil is a hard or "real" asset.
strength = massive polymetallic deposit, high value per tonne, possible takeover target, at this price, literally one wealthy person could acquire the entire claim for less than some peices of real estate at ~ 10M or $9M US.
Galore creek synergies, funding arrangement if feasibility positive, gold but mainly copper mix.
also high risk / high leverage as its troubled at this time with debt and cash flow issues
SHORT POSITIONS:
~ 20 bucks per share debt, at junk bond interest rates of 10-11%.
Near term short over 15, currently trading at ~17-19. model target range $11-12. retreat in metal prices could sing it back under $8-10
note the FDG deal for 10-12 Billion @ $125 coal equates to a PE multiple of roughly 25.