It’s Not Too Late to Bag Gains in This Mining Stock Rebound

Markets have gone wild in recent weeks.

That’s especially true of stock markets. The US market has gone up.

The bond market has moved too. But it has gone down.

As for commodities, they’ve gone on a tear, right? What with Donald Trump’s election win.

So, does that mean it’s too late to jump on the commodities bandwagon? Maybe not.

Here’s why…

The copper price has had a terrific few weeks. It’s up 19.3% since late October.

Iron ore is up 31.7% since early October.

Nickel is up 13.8% since late October.

And zinc has experienced a remarkable increase all year, rising 71.9% from its January low.

Yet, despite these fabulous gains, the good news is that it’s not too late to get in. The Aussie stock market, in particular, has been volatile.

That means that a tonne of great opportunities abound…

From beat-down to rebound

If you look at a short term chart of the S&P/ASX 300 Metals & Mining index, you’ll see that it’s up 74.1% since the late January low.

By comparison, the blue-chip S&P/ASX 200 index is only up 10.7%.

That’s a 7-to-1 outperformance.

Pretty good for a sector that many investors had given up for dead after the resources boom turned to bust.

However, it’s a mistake to think the best days of the resources recovery are behind us. Check out the chart below. This is the Metals & Mining index going back to 2010:

Metals & Mining index

Source: Bloomberg
[Click to enlarge]

Even after the turnaround, the index is still down nearly 48% from the 2011 peak.

To us (and to our in-house resources analyst), that creates some great opportunities for a certain type of resources stock.

Take zinc as an example.

As we noted above, the zinc price is up 71.9% since the January low.

But a tiny stock that resources analyst, Jason Stevenson, has on his buy list is up 27.3% in just the last two weeks. The zinc price is only up 1.5% over the same timeframe.

How’s that for a bounce? Naturally, we can’t give away the stock name here. That’s only available to paying subscribers of his Resource Speculator investment advisory.

That’s not the only stock to have apparently, ‘risen from the dead’.

Another one of Jason’s favourite zinc plays, having initially fallen after Trump’s win, is now up 25.9% since the start of this week.

And another little ripper of Jason’s is up 11.8%. Again, it rallied into the election, assuming a Hillary Clinton win, only to fall and quickly rebound after the Trump win.

So why the rebound in resources stocks?

It’s all about the expected huge stimulus program the market expects Donald Trump to put into place. Being a real estate guy, folks expect Trump to back big infrastructure and building projects.

Not just the wall on the Mexican border either!

If you’ve been to the US recently, especially New York, you’ll know the place is a dump, with broken roads, buildings, bridges, and everything.

If Trump lives up to his promises, there’s going to be a whole lot of public spending on infrastructure. And that’s sure to be good news for commodity prices and resource stocks.

As for who will pay for it?

That’s an entirely different story. Our interest today is on potentially making money from the outcome. We’ll leave it to others to figure out how Trump and the US government will pay off the country’s current and future debts.


Kris Sayce,
For Markets and Money

Editor’s Note: This article was originally published in Money Morning on Friday, 18 November.

Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Markets and Money e-newsletter in 2005. He is the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service, Markets & Money.

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money