Hudbay Minerals (HBM.TO)

A base metals producer. It is viewed as a pretty well-run company. Solid balance sheet. He prefers to stick to more predictable businesses.

Base metals move higher from around June until the end of July. This one has also benefited on breakouts on Copper & Zinc. It is testing an important resistance level now. Technicals are in your favour.

He typically does not own too many materials stocks. It has done okay, but is quite volatile. He is not interested in it.

Commodity prices are at a cyclical low. But people are still churning through copper, lead and zinc. Not a lot of investment has happened in new mines. In the meantime prices will go up. He thinks you will be fine in this company.

Materials is a group that is starting to look more attractive. Global growth is picking up, starting in the US, but spreading to the rest of the world. China is doing a little better. Some of the metal producers are starting to perform well. This stock has based over the last 1.5 years and has been improving relative to the market since June. He would have no trouble owning this today. (See Top Picks.)

Copper and Zinc with byproducts of Gold and Silver He is impressed that they were not doing well two years ago with return on capital of less than 1% and they have improved that to 5% already. If they can maintain where they are then great, but it looks like they are going to get better. Their costs are down to $0.88 on copper, which is over $2. They operate in friendly jurisdictions. (Analysts’ target: $11.00).

(A Top Pick Aug 24/16. Up 48.05%.) Fairly priced. Has a lot of good things going. A large part of their CapX program went into developing Constancia, and that is now behind them. They’ve had some good news leading to the next development of permits and feasibility studies for Rosemont. They continue to have good projects on the horizon. Well-managed. If it pulled back about 15% he would add a little more to his position.

He has taken a basket approach, which includes Lundin (LUN-T), Hudbay, First Quantum (FM-T) and Teck Resources (TECK.B-T). All have a similar looking chart. There is a long-term trend that is kind of breaking. In the short term, it just broke up through another little trend. The longer one will probably keep things encapsulated for a little bit, but it is positive. Has just started taking positions in this whole space. This one looks really good. It won’t have much resistance until he gets around $10.20, and then moves up to $11. If we are going to get a move in the market, all of this space is going to go. (See Top Picks.)

First Quantum (FM-T) or Hudbay (HBM-T)? He tries to only focus in areas of the market that are strong technically and fundamentally. Also, he always looks for new groups of leadership to emerge. In the last few weeks, despite the fact that commodities in general have been spotty, the metals group has started to perform better. Globally, things are getting better economically, but in addition, the US$ has really taken a tumble. When that happens, it tends to be good for emerging markets and good for commodity prices. The 3 metal stocks that stand out would be Hudbay, First Quantum, and Lundin (LUN-T). All 3 look very attractive. He would be OK with all 3.

Base metals producer including predominantly copper and zinc assets around the world. This is really linked to industrial production and global growth. To the extent that this is picking up, it should be a tailwind for this stock. This is not going to be able to coin profits through the cycle, it is going to have boom and bust phases. The conditions seem to be aligning nicely, and the base metals complex for a tailwind to their earnings.

This, like all material stocks, has been punished as the world has been concerned about a Chinese slow down. Zinc is looking really, really interesting as inventories are hitting 7-10 year lows. Copper is going to get tight as we go into 2020. You have to have a timeframe that is 10 years, as you have to get a cycle. Has a good balance sheet.

The bad news is that you had a fairly strong level of resistance and it keeps failing it. The trend line has been broken, definitely. Sell or sell on strength.

This company seems to have trouble getting noticed in the industry. The big build on Constancia is behind them, so going forward they are going to reap the benefits of that. We are seeing a possibility of some significant expansion. They also have the Rosemont mine which will be permitted, probably in the next 12 months. Dividend yield of 0.29%. (Analysts’ price target is $11.25.)

On a seasonal basis, base metal stocks have done well from around October until around April each year. Technically, it is in a downward trend, underperforming the market, momentum indicators on the downside. This is an example of the technicals and the seasonal just not coming together. When you see that, you are better off looking for opportunities elsewhere.

This is fine longer-term. This has been growing, particularly outside of Canada. Feels it is a long-term Hold. It is very difficult for them on an environmental and permitting bases in the US. Well-managed.