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Prospecting for Profits: Unearthing Exciting Mining Stocks and Investing Strategies
Investing Intel’s exploration of the mining space has yielded three stocks with great potential and much more info to guide you on your investing journey!
MCF Energy (TSXV: MCF) (OTCQX: MCFNF) (FRA: DC6) was established by a group of legendary energy entrepreneurs and explorers bringing capital and commitment to strengthening Europe’s energy security through domestic natural gas development. Key stakeholders of the company have previously created or led several billion-dollar energy ventures including in Europe. They are the leading technical, financial and operational minds to leverage this opportunity.
The company aims to offer energy security, but why is this such a key issue for Europe right now?
Click Here to find out.
Happy Juneteenth, and welcome to another edition of Investing Intel from the team at ValueTheMarkets! As always, the newsletter is packed with stock picks and investing insights we think you’ll enjoy, including:
👉 Three stock tips
👉 Investing signals
👉 Fear & Greed analysis
👉 Key dates for your diary
👉 Investment strategy insights
This week, we’re looking at mining for some investment inspiration.
This capital-intensive space is one of the planet’s oldest industries and has been the making of millionaires for centuries. But the sector can be complex, with investors having to factor in influences like geopolitical stirrings, commodity prices, risky exploration ventures and much more into their decision-making process.
That’s why we’ve put together a trio of stock picks and something of an industry explainer in today’s issue. Read on and enjoy!
Arch Resources Inc (NYSE: ARCH)
Arch Resources’ diverse portfolio of high-quality and low-cost mining complexes includes significant reserves of high-quality metallurgical coal. This is used in steelmaking and tends to command higher prices compared to thermal coal.
Demand for metallurgical coal can be strong, especially in developing economies where construction and infrastructure development are in full swing.
Indeed, Arch’s pivot towards steel and coking coal could help it mitigate risks associated with the decline in thermal coal use due to environmental concerns.
Arch Resources has been working on lowering its operational costs, which could improve its margins and profitability in a challenging market.
The company’s history of strong operational performance and efficiency in its mining operations is a major positive.
BHP Group Ltd (NYSE: BHP)
A major feather in BHP’s cap is its highly diversified portfolio of high-quality assets spread across various commodities, including iron ore, coal, copper and petroleum. This diversification helps mitigate the risk of fluctuations in the price of any single commodity.
Iron ore is a significant revenue generator for BHP and, with global infrastructure and construction activities on the rise in economies like China and India, the demand for iron ore is likely to remain strong. Short-term triggers include the possibility of a new Chinese government stimulus package (more about that later).
BHP has been investing in segments like potash and copper, notably through its recent acquisition of Oz Minerals, which are expected to see increased demand in the future due to their use in fertilizers and electric vehicles.
BHP has a track record of robust financial performance and strong cash flow generation, which helps it weather downturns and invest in growth opportunities.
In addition to having solid books, income-focused investors will appreciate that BHP has a history of providing good returns to its shareholders in the form of dividends and share buybacks. Dividend yield sometimes strays into double figures, while its prospective dividend yield is a generous 8.28% according to Morningstar data.
While mining companies are not exactly famed for their environmental consciousness, BHP has been increasingly focusing on sustainable mining practices and ESG (Environmental, Social, and Governance) initiatives.
Franco-Nevada Corp (NYSE: FNV)
Franco-Nevada’s portfolio includes interests in gold, silver, platinum group metals, and oil and gas. Additionally, the company's assets are spread across relatively safe mining jurisdictions around the world, reducing geopolitical risk.
Because Franco-Nevada doesn't actually operate mines, it generates relatively stable cash flows regardless of operational issues that may impact individual miners. This is because the company provides capital to miners in exchange for a portion of their future revenues (royalties) or production (streams).
When commodity prices rise, Franco-Nevada stands to benefit due to its royalty and streaming agreements. Since the costs of these agreements are often fixed or rise only slightly over time, higher commodity prices can lead to greater profit margins.
Franco-Nevada has a strong balance sheet with little to no debt and a robust cash position. This provides financial flexibility and the ability to seize opportunities as they arise.
The company has a track record of making successful acquisitions and investments that drive growth. In addition, many of its agreements provide exposure to exploration upside, which could increase revenues without additional capital outlay.
Mining Details - Chinese Stimulus
The possibility of an injection of positivity from China is big chatter in the mining industry right now. The superpower’s State Council met last week in order to debate new policies aimed at stimulating “effective demand”, according to reports from The South China Morning Post.
This comes after economic readings showed a slip in industrial output, retail sales and property investment, which appears to have influenced legislators to consider some kind of stimulus.
It’s the property side of things which is exciting mining companies and their investors. That’s because, putting it simply, higher sale prices generally lead to an increase in property development projects, significantly increasing demand for metals.
Analysis from Goldman Sachs indicates that the stimulus will be aimed at managing a “multi-year slowdown” in the property market as the bank’s economists stated that “there appears no quick fix” for a real estate sector which is expected to flag for years in lower-tier cities.
Latest data shows that average new home prices in China's 70 major cities inched up 0.1% year-on-year in May 2023, swinging from a 0.2% drop in April. This increase was the first since April 2022.
If stimulus can steady prices or even start to push them higher, this should have a positive knock-on effect for metals prices and miners.
Heading to Reddit now, as we gauge what’s hot in the world of investing, we’re looking at the most-mentioned companies over the 24 hours. The top five are:
NVIDIA (NASDAQ: NVDA)
Advanced Micro Devices (NASDAQ: AMD)
Tesla (NASDAQ: TSLA)
Apple (NASDAQ: AAPL)
DTE Energy (NYSE: DTE)
Chip giants NVIDIA and Advanced Micro Devices are in their customary spot at the top of the list, with tech and AI advancements spurring the continued excitement. The latest major development is AMD releasing more info about its next generation of AI chips, which could enable the company to compete with NVIDIA’s most advanced tech.
Elon Musk’s Tesla is also no stranger to the list, and this week took third place as Morgan Stanley analyst Adam Jonas stated that the company’s charging network alone could be worth up to $100bn.
Tech giant Apple has generated headlines after a leak appeared to reveal that the new 15-inch MacBook Air falls short of expectations. Finally, DTE Energy rounds out our top five as it prepares for planned power outages in order to upgrade its grid.
Fear & Greed
The Fear and Greed Index is a measure of stock market sentiment calculated by CNN Business using seven measures, including market momentum, market volatility, and safe haven demand. It’s meant to shed light on the emotions currently driving the market, giving you insight into how traders are making decisions. Remember, traders are humans, not robots.
We’re slap bang in the middle of greed territory now. As the graphic below indicates, the last week has seen investor sentiment steer firmly into the ‘Extreme Greed’ sphere on the back of sharply rising stock price strength and market momentum.
Dates in the Diary
Monday 19th – US Stock Markets Closed / Canadian PPI Data (May)
Tuesday 20th – US Building and Housing Data (May)
Wednesday 21st – Canadian Retail Sales Data (Apr) / UK Inflation Data (May)
Thursday 22nd – US Home Sales Data (May) / Bank of England Interest Rate Decision
Friday 23rd – US Manufacturing PMI Data (Jun) / UK Retail Sales Data (Jun) / UK Consumer Confidence (Jun)
More Hot Content from ValueTheMarkets
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The CEO of Centrica (CNA), British Gas's parent company, recently warned that the UK needs more gas storage to ensure energy security.
After a strong Q1 beat, Gulfport Energy (GPOR) reveals its dynamic hedging and Appalachian pad development strategies. With a solid financial foundation and a promising growth outlook, the company reaffirms its commitment to delivering sustainable value and returns to shareholders.
EOG Resources Inc (NYSE: EOG) offers a powerful presence in key US shale areas, innovative strategies, a commitment to low-emission energy, and financial resilience to weather industry cycles.
Investing Strategy Ideas: Passive Investment
While last week’s in-focus investing strategy (can I get some love for CAN SLIM?) was ideal for those with their ear pressed firmly to the ground, this time we’re going for the polar opposite.
Passive investment is exactly what it sounds like. Get ready to ignore breaking news and market fluctuations as you prepare to ride out the wave and hold on tight to what you’ve backed.
On the positive side, passive investing can often be cheaper than active investment as you won’t be subject to the same level of fees. On a personal level, it’s also likely to be considerably less stressful.
Of course, there are cons as well. You’re much less likely to beat the market than an investor who is plugged in and engaged with trends and market movements. The approach will also limit an investor’s agility and ability to react to events.
But then again, that’s kind of the idea.
So, what kind of stocks or instruments does a passive investment strategy work best with?
Some of the most common methods of passive investment include investing in funds which back a major benchmark or index like the S&P500 or NASDAQ 100.
Generally, passive investment involves holding on to investments which mirror the performance of the broader market and protects against the volatility of placing all eggs in one basket.
Until Next Time!
Many thanks for taking the time to read Investing Intel today. We hope you’ve enjoyed our insights and are looking forward to more in the week ahead.
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