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

SHORT. From a valuation point it is not cheap. He thinks it has lots of room to go further down. It is exposed to the wrong stuff at the wrong time.

Downgraded to junk status recently. Involved with Fort Hills, which is the big cap spend they have through to 2017. Debt is not a big concern. They are in the met coal-copper space, and neither looks enticing, especially met coal. M&A is on the back burner and they want to focus on getting Fort Hills across the line and manage their debt.

This needs a recovery in commodity prices. Metallurgical coal is a key product for them. Because of the Chinese situation, that continues to be weak. Copper is a critical product for them, and he thinks it is close to its lows, but doesn’t see a big improvement until 2017. The market is particularly concerned about the money they are putting into Fort Hills. Their balance sheet is a concern and they cut the dividend. Doesn’t think there will be a catalyst for this to improve for the next 12 months.

During ‘08/’09 it went way down below $4 because people were worried about their ability to service the debt. Coal is a bit of a disaster right now. Zinc is at a 5 year low. If they had no debt it would be a great time to buy in, but that is not the case. No one knows what is going to happen to commodity prices.

Bought Fording Coal just as China and the whole global economy went through a huge swoon. Taking on that debt almost sunk the company. They got an injection of capital from the Chinese. Over time China resuscitated their economy with a huge stimulus package and coal, copper and zinc prices rose. Since then basically everything has been unwinding. Commodity companies can be extremely cyclical and fall much further than you anticipate.

(A Top Pick July 7/15. Up 27.16%.) (A Short) This was the type of stock that he likes to short. Had really bad price momentum and a levered balance sheet with not a lot of cash flow. Has started covering his position.

This has very, very strong seasonality. It tends to bottom around the middle to the end of October, and then tends to move higher. It doesn’t work all the time. This year the stock is starting to show early signs of support. This is probably reaching a very important low in the next 2-3 weeks, and that will be the opportunity to accumulate.

This is a commodity stock with copper and some gold content. This whole area is an “avoid” until we see the world economic numbers perking up. That could happen within a year or so, but right now we seem to be oversupplied with a lot of the commodities.

This company has had some very difficult times. If you own, he would hang onto the stock right here.

Copper will not stay down forever. Zinc is a hot product and in short supply. The real question mark is coal. He doesn’t see coal doing anything in the short term. If you own, be prepared to be patient.

This is one area that has been absolutely crushed. It looks like there could be a downside target of around $4. That doesn’t mean it is going to happen, but certainly the biggest thing that could change this is a change in the US$ which would sort of lift these up. We don’t have a supply issue as much as a pricing issue.

He still owns this, but has a very low exposure to it. It is suffering because metallurgical coal and copper prices are very depressed. Has a good balance sheet. He wouldn’t be surprised or upset if they eliminated the dividend to stay OK. This will be a survivor.

This has been the poster child for all those triple storm factors. Met coal pricing is at $84 a ton, a low that we haven’t seen in a long, long time. Copper is the depressed metal. They do have zinc, which is good. However, their 4^th leg is oil and nobody wants to own that. However, at these prices, the stock is quite attractive. They have done a good job of maintaining the balance sheet and its flexibility. When commodity prices are trading below cost for 50% of the industry, those companies will have to shut down. This one is not shutting down.

From an operating point of view, this is best in class in Canada. What they have done since the financial crisis until now, in terms of stability, has been fantastic. However, the commodity price environment has been detrimental. The one commodity that is doing well is zinc, but not enough to really lift the company out. Under $10 you really have to look at this.

Doesn’t like the mix yet. With China acting like it is, and if iron ore gets hit further, it could go down to $3 again.