Rio Tinto

Commodities get vulnerable when there is concern about the market. If he was to buy a metals producer he would buy RIO-N, which is sitting on a rising moving average. TECK.B appears to have lost its upward momentum. The yield on both of these is above 5% and it will become a favorite space once investors regain their confidence.

(Past Top Pick, August 16, 2017, Up 16%) Sold in March around $55. He expects a near-term turn in the basic materials, which have enjoyed good recent weeks. Look at this space now.

Rio Tinto (RIO-N) versus BHP (BBL-N). These are the two biggest global mining companies in the world. You want to own these when the underlying commodity prices do well. In the near term their underlying commodity prices are struggling, so he would not own either one.

(A Top Pick September 29/17 - Up 24%) They were bullish in commodities coming into this year. This is the largest miner. Still like it.

(A Top Pick May 30, 2017. Up 41%). Investors always go back to cash. Despite their problems, oil companies and mining companies still produce a lot of cash. When things go slower, these companies stop investing (lower CAPEX) and their free cash flow goes up more. He anticipated last year that with all that free cash flow, people would start buying the stock.

(A Top Pick July 27/16. Up 64.41%.) A large producer and a lot of it is iron ore. Still has firmed up and China has relatively firmed up. Sold his holdings.

His general view on the oil majors is effectively the same that he has on the mining majors, that is, we have sort of come through the other side. In many ways, what happened to mining is similar to what happened to oil. There were big supply issues which are slowly coming to an end. Copper has worked, global has been interesting, etc. This is a little more expensive than it was 18 months ago, but still relatively cheap. He prefers BHP Billiton (BHP-N), but doesn’t have any problem with buying this company here.

A very high quality company with a great cash flow. They have a dispute with regards to information they released, concerning a coal deposit they bought. It looks like it might result in some criminal charges. He would stay out of this, until you see how that is going to resolve itself.

Chart shows a nice uptrend. There was some resistance just below $40, and it broke through that. There is going to be some choppiness. If the trend breaks, then he would have some concerns. This is an area where you may just want to get the right space and ride the whole thing up. There are a lot of places where you can make a lot of money in undervalued names, but you also run the risk. Look at the XBM-T ETF, which covers all the base metals in that area and has done very well for him.

As a bulk commodities miner, this is looking more interesting. The space has really perked up over the last 6 months. He is starting to see some signs of inflation and the things that are related to inflation. 2018 will be a key year as to whether we get the kind of recovery and move that we saw in the late 2007-2008 and 2010. He would be watching these types of companies.

What better way to play the manufacturing uptick or the strength of the manufacturing economy than to play one of the world’s largest metal and mining companies. Between Oct 4 and Jan 6, the average gain is 10.76%, and has been positive in 15 of the past 20 periods. There is a trend of higher highs and higher lows. It’s bumping up against long-term resistance at about $50. Has really gone sideways at that level since the recession. If we do see a break out, we should see tremendous highs ahead. He wants to be seeing the play in copper even if there is an uptick in gold. (Analysts’ price target is $55.)

Recently, over the last few weeks, the US Economic Surprise data has started to improve. There have been lots of great economic reports from around the world over the last few weeks. Japan is growing at over 4% for the 1^st time in 20 years. He wants to have exposure to that. Basic materials area is an area that has been in favour since 2011. This company is one of the biggest producers of copper, iron ore, met coal and other commodities around the world. They do not hedge their production, so if prices go up, they benefit. Really prudently managed. Almost no debt. Dividend yield of 6.3%. (Analysts’ price target is $52.66.)

He has been doing a lot of reading and there is some good research coming out of the big firms arguing that they have their balance sheets fixed up. They are not counting on China, but are counting on other countries. If China is stable and the other economies keep growing, companies are arguing that we are going to have another big cycle. You don’t need to bet on a smaller company, if you bet on a big company you are going to get a very nice return. Yield of 1.2%. (Analysts’ price target is $46.)