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

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.

This has done extremely well, and thinks there will be more upside ahead of them. Copper, metallurgical coal and zinc. Zinc is one of the favourite metals over the next 3-5 years. Trading at 12.8X enterprise value to EBITDA trailing. It is cash flow positive which is very unusual for a mining company. Has a 19% ROE. Copper has been given a new long-term monthly and quarterly Buy, which typically means it goes longer and stronger. Very attractive.

He doesn’t own this, because it is a commodities/materials stock, and he would rather own energy in his economically sensitive sectors. This is a survivor, and is leveraged to coal, and then zinc and copper. They definitely came through the last 2 years, selling off some assets, and repairing their balance sheets. If you believe we are going to get an inflationary environment over the next couple of years, $27-$28 is a reasonable buy.

Benefiting strongly from metallurgical coal prices. They also have zinc and copper. It all ties back into if Trump goes ahead with his infrastructure plans and Chinese demand picking up. If so, a company like this will do well.

Overpriced? This has had a great run, and currently is having a little bit of a selloff. He would like to see it a couple of dollars lower before he would buy. If it were to break below $23, he would Sell it.

This has a lot of different moving parts to this. The longer-term chart has been okay, but seems to be breaking down a little. Generally speaking, a lot of the metals can start the year off pretty good, so this company may bounce. However, the chart is looking a little tepid and it may be breaking down. He would like to see the current area break out before he bought into it.