Investment Contrarians

mining stocks


Uranium Stocks for Long-Term Investing Success?

By for Investment Contrarians | Dec 4, 2013

Long-Term Investing SuccessMany times people ask me how I come up with my investment strategy.

Obviously, there is no one answer, but a common trick I use when developing any investment strategy is to look for areas where market sentiment still remains below peak optimism.

Following the tragic events of the Fukushima Daiichi nuclear power plant disaster in Japan, market sentiment for uranium dropped, naturally. As Japan halted all nuclear power plants, shareholders adjusted their investment strategy to get out of uranium mining stocks.

Now, the time when market sentiment is about to shift for the uranium industry, I believe, is close at hand.

The reality for energy use over the next decade is that it will grow massively around the world. Nations like China and India cannot keep up with industrial demand for energy, which is now causing huge amounts of pollution.

Chinese authorities are aware of the polluting side effects of conventional energy sources, such as coal, and are building several new nuclear power plants, which is a much cleaner energy source. Market sentiment will continue to shift in favor of uranium as more nations realize that nuclear power will continue to be with us for some time.

Adjusting your investment strategy before everyone jumps on board is important. Even Japan is now conducting analysis to re-open 14 nuclear power plants, as five utilities within that nation are requesting these energy sources be put back online.

If you’re going to look for a uranium miner to add to your portfolio, one well-established and smooth-running company to consider is Cameco Corporation (NYSE/CCJ, TSX/CCO).

Cameco Corp Chart

Chart courtesy of www.StockCharts.com

In the latest quarter, … Read More


Chart Shows Investor Sentiment Out of Touch with Reality

By for Investment Contrarians | Nov 13, 2013

Investor Sentiment Out of TouchTo some people in the mainstream media, last week’s advance estimate on U.S. gross domestic product (GDP) growth was seen as a positive surprise.

According to the U.S. Department of Commerce, the advance estimate on U.S. GDP growth for the third quarter of 2013 was an annual rate of 2.8%. In the second quarter, real GDP growth was 2.5%. (Source: U.S. Department of Commerce, November 7, 2013.)

Reading just the headline, it would be easy to assume that GDP growth was accelerating on a solid footing. However, had they looked just a bit deeper, they’d find that the truth is the GDP growth estimate that was reported was actually much worse than the headline number.

The fundamental strength underpinning this increase in GDP growth was temporary, and it could lead to a much weaker fourth quarter. If investor sentiment were propelled higher due to this blip in GDP growth, it would be a mistake.

The big increase in GDP growth was due to a build-up of inventory, a reduction of imports, and an increase in spending by state and local governments.

What happened to consumer spending, which makes up three-quarters of our economy? Personal consumption increased by 1.5% in the third quarter versus an increase of 1.8% in the second quarter. People began to reduce their spending versus the first half of the year.

Inventory increased by $86.0 billion in the third quarter, versus a $56.6 billion increase in the second quarter and a $42.2 billion increase in the first quarter.

Just the increase in inventory alone added 0.83% to the GDP growth figure. If investor sentiment is increasing based … Read More


Declining Sector Set to Outperform Stock Market

By for Investment Contrarians | Nov 6, 2013

Outperform Stock MarketWhen it comes to the recent batch of corporate earnings releases, some investors might be cheering. But if you look a bit closer at the results, you will notice the underlying fundamentals aren’t as strong as they first appear.

One thing to remember: in the equities market, it’s all about expectations. A company might report corporate earnings of $100 million, but if analysts in the equities market were expecting $150 million, the results would actually be disappointing.

The reason for this is that the equities market is a discounting mechanism for future corporate earnings. Analysts and investors estimate what the next 12–24 months might bring in terms of corporate earnings and accordingly adjust their valuations for various stocks in the equities market.

What’s interesting to note in this corporate earnings season so far is that the spread between actual and estimated corporate earnings is declining. This means companies are having difficulty exceeding expectations.

So far, 244 of the S&P 500 companies have reported corporate earnings, and while 75% have beaten corporate earnings estimates, on average, they have only exceeded these expectations by 0.8%. The four-year average is 6.5%. (Source: FactSet, October 25, 2013.)

And if you listen to executives at various companies within the equities market, you will notice another common theme: companies are having difficulty finding and generating revenue growth.

Of the S&P 500 firms in the equities market that have reported corporate earnings so far, only 52% have exceeded revenue estimates—far below the four-year average of 59%.

This is why they are issuing dividends and buying back shares; they can’t figure out a better way to invest the … Read More


Two Precious Metals with a Compelling Supply-Demand Dynamic

By for Investment Contrarians | Oct 29, 2013

Two Precious MetalsAs readers of Investment Contrarians are probably well aware, precious metals have been hit hard this year. Along with the drop in the price of precious metals, mining stocks have also significantly declined in price.

However, I think we might be entering a period of increased demand that should see higher prices for the precious metals sector and the associated mining stocks.

Longtime readers won’t be surprised when I mention two precious metals that are developing increased demand from industrial use: platinum and palladium.

In past articles, I have written extensively on both of these white precious metals and that there will be significant imbalances in the market—not the financial (paper) market, but actual physical demand for these precious metals.

As the majority of demand for both of these precious metals comes from industrial use, specifically in the construction of catalytic converters for the automotive industry, it’s quite easy to see where demand and supply will be moving forward.

Mining stocks involved in both of these precious metals are having difficulty increasing supply. The two nations that supply most of these two precious metals are Russia and South Africa. Mining stocks have had a significant amount of trouble over the past year especially in South Africa, with labor issues causing disruptions in production and higher costs.

Demand comes from vehicle sales, and with the cheap money being pumped worldwide, this means affordable financing for millions of people. As you probably know, car sales in America are booming once again. But a huge market over the next decade will be China.

When you consider there are still hundreds of millions of … Read More


Widespread Opportunities Opening Up for Speculators in This Mining Sector

By for Investment Contrarians | Aug 26, 2013

Widespread Opportunities Opening Up for Speculators in This Mining SectorGold prices have bounced back, jumping above $1,350 an ounce; but I contend that the advance will not be sustainable as the metal remains in a bear market.

The problem we are seeing is that the mining sector is under duress, especially the junior miners that are struggling to maintain costs while gold prices and demand decline.

With commodity prices down across the board, Glencore Xstrata Plc wrote down its mining assets by $7.66 billion in the first six months of 2013. The company, which trades on the London stock exchange, attributed the massive writedown to weak commodity prices.

While commodity prices are weak at this juncture, I continue to see some opportunities in the mining companies and junior gold miners.

China has also been buying mining companies around the world in an effort to increase its reserves. This is one reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground, just waiting to be developed but needing a cash-rich partner to get the ore out of the ground.

In fact, it often makes sense to buy a sector when no one else wants to buy it. In this way, you pay lower prices, rather than chasing a sector at a higher point. Gold, silver, and copper are good examples.

In the large-cap metals area, the top players are Freeport-McMoRan Copper & Gold Inc. (NYSE/FCX), Barrick Gold Corporation (NYSE/ABX, TSX/ABX), and Newmont Mining Corporation (NYSE/NEM). These stocks are close to their 52-week lows and pay a good dividend. The short-term may be volatile, but you know that there’s … Read More