Commodity prices
Broadly speaking, things are looking much better for Alumina (AWC, given alumina and aluminium prices), same with Newcrest (NCM) given copper and gold.
Even IPL; operationally, given DAP and urea pricing, conditions remain elevated, as much as they are say for iron ore or steel. Yet BHP, FMG and RIO have all significantly outperformed, while AWC and NCM are deeply depressed, and comparatively, IPL has undershot peers, and been generally unspectacular.
There’s no great point here; we think AWC trades far below replacement value, we think NCM is making free cash flows and margins comparable to the iron ore majors, but is at a literal 5 year low (by share price) whilst giving us a good hedge against copper prices exploding (ala lithium), and IPL makes a great yield on current DAP pricing, which may or may last, in the same way that iron ore prices may not last, but at least comes without risk of the China property market overhang.
To that end, China does appear to be pulling out all the stops to save the property market, and such measures are likely to have some near term stabilising effects, even as in the long run they are unlikely to get any traction given awful fundamentals.
So, a generally good backdrop for commodities, given the China story, against worries of a global slowdown, and within commodity producers, a preference for some of the comparatively unloved or better priced stocks like AWC, IPL and NCM.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.