Banking Profits on Contrarian Ideas | Australian Markets
Hidden gems within the useful resource market are considerable and able to be unlocked by contrarian buyers. But warning: this isn’t a market for buyers preferring to comply with news headlines and classy stock concepts!
As you may need found out, I attempt to keep away from making particular stock suggestions in your Mining Memo updates.
I reserve these for my paid readership group!
However, sometimes, I share an investment concept, like this one from early March: Fortescue Metals [ASX: FMG].
At the time, this company was being ‘trash-talked’ by the mainstream media.
For buyers unable to look past the narrative that China’s economic system confronted imminent doom, investing in iron ore miners was a canine of an concept!
But that is what I wrote concerning the alternative for Australia’s largest pure-play iron ore miner, Fortescue Metals, earlier within the yr:
This $52 billion main just isn’t a speculative useful resource play, however given the company’s price motion over the past 12 months, it could as properly be!
After topping out in February 2024, this iron ore main plummeted over 45% final yr and has continued to troll multi-year lows.
While FMG did have a spark of optimism earlier within the yr, these positive aspects evaporated after its woeful earnings report final month.
First-half revenue plunged by 53 per cent, forcing Fortescue to slice its dividend payout by more than 50 per cent.
But regardless of the pessimism and earnings drop, Fortescue continues to be hovering simply above its main low from mid-2024:
|
|
|
Source: Trading View |
That trough marked a period of peak pessimism in China’s financial outlook, which provides a clear line within the sand for FMG buyers.
A break under indicators main price weak spot, but when FMG consolidates round these ranges, that would offer a basis for a restoration.
So, what’s occurred to FMG shares?
The company has rallied about 20%.
Not dangerous, on condition that that is a $60 billion titan, one of Australia’s largest firms.
However, the important thing factor I used to be attempting to display right here is that the market costs in occasions properly earlier than they occur.
The mainstream sentiment for iron ore miners has improved markedly since I wrote that piece.
So does that imply you must buy FMG now?
Well, I simply learn a piece in Reuters detailing why it thinks Chinese iron ore imports are anticipated to stay sturdy all through 2025 and 2026.
According to them, it will keep costs strong.
An informal observer may assume that’s a stable cause to lastly take a look at iron ore stocks.
But bear in mind, this was the identical news outlet proposing iron ore’s demise earlier within the yr—exactly the time you must have invested in FMG!
When it’s within the news, it’s within the price.
And that’s why I’d be far more hesitant about shopping for FMG stocks proper now. That window has closed.
But there’s nonetheless loads of OTHER contrarian concepts within the useful resource market, ready to shine.
Again that’s reserved for my paid readership group.
Contrarian investments ship actual outcomes.
Here’s some examples…
Last Thursday, we closed our place on the mining service play Perenti [ASX: PRN]. Locking in a 65% gain in 7 months.
We entered that when situations had been sluggish for mining service stocks.
Last week, I additionally instructed my readers to promote HALF of their place in two different useful resource firms.
One of these mined a particular sort of essential mineral… We locked in a 70% gain in three months.
The different was a copper-gold explorer, the place we cut half of our place for an average gain of 195%.
If that is the kind of investment strategy that meshes with you, I counsel testing some of my latest concepts right here.
There’s nonetheless loads of contrarian alternatives left within the useful resource market. In reality, this market stays overwhelmingly bearish.
And that’s excellent as soon as you’ll be able to re-wire your investment strategy to this sort of pondering.
But when you want to comply with news headlines and invest in stylish stock concepts, I counsel wanting elsewhere!
Until subsequent time.
Regards,
James Cooper,
Mining: Phase One and Diggers and Drillers
All advice is basic advice and has not taken into consideration your personal circumstances.
Please search impartial financial advice concerning your own scenario, or if doubtful concerning the suitability of an investment.
James Cooper has been a working geologist in mines throughout Australia, Canada, and Africa for the reason that early 2000s. He’s led the operations of tiny explorers by means of to very large producer outfits. He’s seen booms and busts firsthand and he additionally understands the cyclical nature of particular person commodities. For instance, James was proper there when Barrick Gold launched an monumental $7.5 billion takeover bid for Equinox. That was the height of the final cycle.
With his background as a geo and finance skilled, he brings a distinctive insight and expertise to Fat Tail Investment Research. He writes the broader resource-focused investing letter Diggers and Drillers and the ultra-speculative explorer-focused trading service Mining: Phase One.
James’s Premium Subscriptions
Stay up to date with the latest news within the Australian markets! Our web site is your go-to source for cutting-edge financial news, market trends, financial insights, and updates on native trade. We present every day updates to make sure you have entry to the freshest data on Australian stock actions, commodity costs, currency fluctuations, and key financial developments.
Explore how these trends are shaping the long run of Australia’s economic system! Visit us often for probably the most partaking and informative market content material by clicking right here. Our rigorously curated articles will keep you knowledgeable on market shifts, investment methods, regulatory modifications, and pivotal moments within the Australian financial panorama.
