- XME is likely undervalued even in spite of near-term risks.
- A simple valuation gauge would suggest to me that investors are pricing in large risks going forward.
- Even if the recent Evergrande story continues to put pressure on steel prices, XME is likely to produce at least enough earnings to support a positive forward return.
- The main, important risk here is another global recession. But provided Evergrande (or another story) is not large or systemic enough to provide the necessary spark/catalyst, a recession should be avoided.
- We are arguably into a new business cycle, not facing another imminent recession, and metals and miners look under-priced. The obvious trade is to short commodities into the recent headwinds; the contrarian trade says that even in light of recent headwinds, XME is cheap.
For further details see:
XME: Undervalued In Spite Of Near-Term Headwinds