First Quantum Minerals (FM-T)

Commodities were in a 10-year bear market and only recently reversed. FCX has been the leader, and has just pulled back and is set for another leg up. He also owns HBM. All of these will benefit, as we're in a deficit of copper and will be for quite some time. EVs use more copper than traditional vehicles. Should be core in a portfolio.

They've put their troubles behind them. Can't predict their near future, but in a year or two there could be a tailwind for commodity prices. They are getting earnings from some of their earnings now which is reducing their debt.

SHORT (A Top Pick Jun 28/17, Down 42%) It's been a wild ride. It has come off more recently. The thesis has not changed on this stock. It has terrible valuation with virtually no return on equity. It missed on the most recent quarter. It is not cheap and a highly volatile stock.

An exceptionally volatile stock. It produces copper in dangerous parts of the world. Lots of companies are having problems these days with governments, not getting good enough deals. You have to be really careful. This is going to track the Chinese stock market pretty carefully. The company is well-run. Has a lot of debt. If you are going to invest in stocks like this, make sure it is the appropriate amount in your portfolio and don’t own too much.

First Quantum (FM-T) or Hudbay (HBM-T)? He tries to only focus in areas of the market that are strong technically and fundamentally. Also, he always looks for new groups of leadership to emerge. In the last few weeks, despite the fact that commodities in general have been spotty, the metals group has started to perform better. Globally, things are getting better economically, but in addition, the US$ has really taken a tumble. When that happens, it tends to be good for emerging markets and good for commodity prices. The 3 metal stocks that stand out would be Hudbay, First Quantum, and Lundin (LUN-T). All 3 look very attractive. He would be OK with all 3.

A good Short? The short answer is yes, and the long answer is yes, but he would advise against doing it. To do it, he would put a Long against it such as Lundin Mining (LUN-T) or Hudbay Minerals (HBM-T). They have an awful lot of debt and are very concentrated in Zambia. There are execution risks on a very large mine they are building in Panama. With a lot of debt attached, this is a very tough place to be.

*SHORT* This is in line with his concern that the cyclical value may have peaked and may not be recovering in this cycle. Despite having a really good run from July to the election, this has really trended down. Their problem is that they have always had a lot of debt. Expensive on an earnings basis, trading at 43X trailing. A really low ROE. Highly volatile. (Analysts’ price target is $17.63.)