ATUUF - Navigating a Golden Opportunity With One Experts Top Picks | Benzinga
Source: Malcolm Shaw 03/15/2024
Malcolm Shaw of Hydra Capital Partners shares some of his own investment ideas in the metals and energy markets. He also shares a myriad of stocks that he owns and follows. He presents these ideas as a jumping-off point for those looking to kick-start their own due diligence in the commodity sector.
The gold sector has taken center stage this month, with prices soaring to unprecedented heights.
Despite the impressive rally, many investors remain skeptical, having been burned by false starts in the past. However, as central banks continue to accumulate gold and the U.S. dollar weakens, the precious metal's prospects are looking brighter than ever.
Gold's Breakout and Investor Sentiment
Gold's recent surge past the $2,080 resistance level has caught many investors off guard. Most have little to no exposure to the sector and are unfamiliar with the relevant tickers and valuations.
This lack of participation means that the gold rally may still have significant room to run as disbelief slowly fades and investors start to pile in, similar to the energy sector's recovery in late 2020/early 2021.
Despite the recent rally, many gold stocks are trading at historically attractive valuations based on price-to-net asset value (P/NAV) multiples, free cash flow yields, and cash flow multiples.
Even major players like Newmont Corp. (NYSE: NEM) have yet to show signs of froth, trading near their 5-year lows. These compelling fundamentals, combined with the fact that gold has never been this high, suggest that the sector may be poised for a sustained rally.
Other Commodities To Watch
While gold steals the spotlight, other commodities are also showing promise. Silver seems to be riding along with gold, though a lot of "silver bugs" think it may even outperform the yellow metal.
Copper, a key player in the energy transition, is now through the critical $4.00/pound level. A weakening U.S. dollar and healthy supply-demand fundamentals bode well for the red metal. Zinc is following copper.
Oil and natural gas stocks remain cheap relative to other sectors, while uranium's structural supply-demand picture remains bullish.
Lithium, on the other hand, has been weak and may be vulnerable to tax-loss selling later this year, and Nickel is still seeing overhang from new Indonesian supply.
Be Right and Sit Tight
As a seasoned commodities investor, I prefer to keep my approach straightforward. Examining the TSX Venture index's long-term chart reveals the potential for significant upside if we are indeed witnessing the beginning of a synchronized commodity upswing. Should the current momentum persist for a couple/few more weeks, the Venture index may experience a "golden cross," where the 50-day moving average surpasses the 200-day moving average — which would be a promising technical indicator for those looking for the next significant advance in the commodity sector.
While I remain cautiously optimistic, the mere act of penning this article could suggest that the market may need to consolidate before continuing its ascent. It's important to note that prior to this emerging trend, commodity stocks have endured a prolonged period of lackluster performance. However, given the current market conditions, I believe that a comprehensive commodity rally could have staying power.
I must admit that I'm more optimistic now than I have been for quite some time, and I can only hope that sharing these thoughts doesn't inadvertently hinder the market's progress. In the sections that follow, I provide a few thoughts on both familiar and new investment ideas while maintaining a patient and steadfast approach, adhering to the mantra of "be right and sit tight."
Energy and Copper Recommendations
Tenaz Energy Corp. (OTC: ATUUF):
Tenaz is a favorite of mine. With a disciplined M&A strategy and a lean, experienced management team, Tenaz Energy is well-positioned to capitalize on the current market environment whereby larger energy companies are looking to rationalize their portfolios while finding credible, competent teams to which they can divest their non-core assets.
The company's low share count and sub-$100 million market cap provide ample room for growth as it executes on its business plan. Given the company's M&A focus, Tenaz's growth is inevitable. Meanwhile, Tenaz is among the cheapest energy stocks out there, trading at one of the lowest EV/CF (enterprise value divided by annual cash flow) multiples in the sector (around 1.5x, versus ...