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

(Market Call Minute.)

(Market Call Minute.) He is Short the stock. Given the balance sheet, it is too far extended. It had a good run.

This has had a huge run, so she would not be buying it here. It is expensive. Also it depends on your conviction of copper and coal prices, and she does not have a high level of conviction.

This has gone up because it has been very leveraged to the commodity cycle, and commodities have done a bit better. However, it is a lot more dependent on coal than it used to be. Coal markets are not as in equilibrium as they had been, and have been under pressure lately, which gives him some concern. This is a more aggressive play. He has a little bit of this for some of his more aggressive accounts, but for lesser aggressive accounts, he uses Hudbay Minerals (HBM-T) as an alternative.

(Market Call Minute.) He likes this.

This has rallied quite strongly this past year, because it got oversold when it got below $5. When the US$ was weakening, that was positive for commodities. Also, this is involved in an oil sands project with Suncor (SU-T), and with the improvement in energy prices, they are participating in that as well. When there are questions about global growth, this will pull back and that is when she would pick up the stock. Over the long-term, it is a good name to own. They are in copper, iron ore as well as zinc, which is going to have a more favourable demand over the next few years.

Base metals have seasonal strength from the second week in Jan. until the second week in July. It is in an upward trend, recently breaking to a new high. It is an attractive ownership until the end of this week. It should show signs of concern then.

(Market Call Minute.) You have to have a really strong stomach to own this stock, because it is a real roller coaster. It goes up and down with commodity prices, which nobody can predict. Thinks commodity prices are in a bit of a bubble in the last 6 months, so he wouldn’t touch this.

He wouldn’t touch this at these levels. It has had a huge run, and is trading at a very, very rich valuation. There is a lot of betting that copper and coal prices are going to recover. Coal prices are not very strong and copper prices are okay, but there is a lot of supply that could potentially come on. Zinc prices are really the good news story in this company, but trading at a very, very rich valuation. The whole metals sector has had a huge “short covering” bounce, and it is a high risk trade at this stage of the game.

The stock has been fantastic, but exceptionally volatile. Made a nice bottom in January below $5, and then had some pretty big moves. He would suggest you take something like a 3^rd of what you want, and then game plan how you want to work the other two thirds. On a Relative Strength basis, it ranks really high. He would wait for a big down day. The one thing we get in the summer is low volumes. There is always lots of volatility in July and August.

For years analysts, including him, have been negative on this. A long-term chart shows lower lows and lower highs. Now something is changing. Is this because of demand coming back for copper, etc., or a simply short-covering on a relief trade? He is more on the side of short-covering on a relief trade than new demand. For the next few years it probably bounces back and forth between $6-$10 on the low end and the recent highs. He doesn’t like it here, and would be a seller, and buy it back on a dip.

(Market Call Minute.) This is discounting a very strong improvement in copper and in coal prices. Thinks it has run a little further than it should have, so he would wait for a pullback.

This went from $3.85 to the current price of $16+. He had been waiting for them to do some write offs. They did a very small one. The stocks are high volatile situations that people seem to be betting on, as opposed to fundamentals. If something should happen to China, this signals all the way back to $3 again.

Sold his holdings at about $14. The company is going to survive. They’ve cut costs, cut CapX and are in the midst of redoing their balance sheet, pushing the term of their debt portfolio out. They are doing all the right things, but all we need is a synchronized global recovery. If you own, he would continue to Hold, but wouldn’t be chasing it.

If you believe in commodities this is the one to be in. But the balance sheet is lousy.