Teck Resources Ltd. (B) (TECK.B.TO)

He really likes this and just recently entered it. An aggregation of a bunch of different commodities giving you exposure to met coal, copper, zinc as well as oil. He also likes the assets they own. Because it has pulled back from $35 a share, down to $26, this is an attractive entry point. There is some volatility, but being spread across 4 different commodities should dampen that a little.

They had a very strong fourth quarter and their guidance for the first quarter of this year because of pre-buying of Iron Ore in the fourth quarter on fears of prices spiking. They had a big run. Iron ore prices are not going to go back to the levels they were before. The zinc outlook is quite favourable. It is now getting back down to levels where she may pick up some more.

They had a fantastic run for a little more than a year. He thinks this will continue. The mining cycle should be three or four years long. They have a lot of zinc revenue.

What a rollercoaster. They almost went bankrupt when coal prices tanked in ’07. If you can live with that kind of volatility then maybe this one is for you. He can’t predict coal and zinc prices. TECK.B-T is a price taker, not a price maker so he does not want to own it.

On a number of occasions, this has gone from $4-$5 to something like $30, and then back down to $4-$5. The time to buy it was when everybody hated it, a year ago. He doesn’t have a huge level of confidence that copper and met coal prices are going to last.

Reporting 4^th quarter earnings on Wednesday. They’ll have great earnings because of met coal prices. They do 27 million metric tons of coal a year. Coal has probably done $100 better than they expected in the past year. It gave them $2.7 billion in increased earnings in the past year. Met coal prices, after running from $100 to almost $300, have come back down to $160, and expects it will go lower. Thinks the stock is going to be looking at down earnings in the next couple of years. If you own, he would sell it now.

He likes this. A good play if you like copper, zinc and metallurgical coal. Last year, this went from $4 to $28, a massive move. Metallurgical coal drove the stock price last year, especially in China. It was trading at around $90 a ton, and then by November it was trading over $300 a ton. Since that time, it has come back down to about $160-$180. This allowed Teck to lock in some longer-term contracts and to help pay off debt. You are not going to see the same kind of performance this year, but he thinks the stock can get back to $40 with another good year of resource markets.

What really drives this company is commodity prices. They have exposure to zinc, copper, coal, etc. A year ago, there was fear about China imploding, Europe imploding, oil at $27 causing bankruptcies globally, and that brought down the whole commodity complex. Now that commodity prices have rebounded, this looks like a good investment. It pays a little dividend.

He added to it. Met. coal was the dog. It hit $80. Mines closed down and capacity was shut in. The political decision was that Chinese coal mines shut down for a while and it took the TECK.B-T stock up 4 to 5 times. Teck will make more money in this quarter than they will ever make, but the big run is over. Zinc and copper are still working for them, however. You should not pay peak earnings for any stock so he is looking for the exit point.

Their upside to the oil sands is mainly through Fort Hill, which is being managed by other partners. It is an excellent long-term project. Longer-term, this is going to turn out to be a very good project. The thing that has been driving the company is coal. There has been a tremendous increase in the price of met coal over the last year or so. That has really benefited them. There could be significant downside on a company that has gone from $5 to $30 within a year’s time. They have become much more dependent on coal. He is currently at the point where he is considering taking profits.

He likes this. It is going to be a little challenged to see the year that it had last year. It has been pulling back lately. There are no real obvious catalysts. All the commodities took a bit of a downturn in the last day or so. US infrastructure won’t be enough to move the needle and China isn’t growing its infrastructure at the same rate as it was before. A decent name to hold, and if you get a substantive pullback of 5% or more, it would be a Buy.

The coal market in China was the big one. He bought the bonds when the coal market dropped off. They cut off mining of this in China and the price went way back up, but now coal production in China is starting to come back. He has RIO-N. There are too many things in TECH.B-T that can go the other way.

Stunned that this has done as well as it has. It is well-run. They have a good, low cost structure. He usually stays away from mining companies. You have to remember that it is incredibly volatile. As investor sentiment turns, you have to be prepared to take a loss if you think the winds are changing. He doesn’t like investing in cyclical companies when interest rates are starting to rise. Also, the global economy is not doing that well. The US$ is appreciating substantially to most major currencies, which is not good for global trade. Also, the president elect is threatening trade wars, which is not good for global trade.

We have seen where this stock CAN go. It’s moved not so much on copper as on Met Coal. It is one of those companies that has had too much leverage. It has been a huge benefit to have this operating leverage in this market recently, though. It has great price momentum, but is a neutral for him due to its valuation.

He likes shorting darlings and so put on a short mid-December. It is hard to have coal selling for 100% more than the cost of production. Every single coal mine in the world will come on line. So the price of met-coal should become depressed in the near future.