Rick Rule, president and CEO, Rule Investment Media LLC
FOCUS: Natural resource stocks
Top Picks: Sprott, Meteoric, Africa Oil
MARKET OUTLOOK:
Volatility appears to be the current hallmark of global equity markets, albeit with most sectors and indexes exhibiting weakness.
Global reaction to the trade and economic policies of U.S. President Donald Trump’s administration, and concerns about a global trade war have roiled almost every asset class. Canadian domiciled natural resource markets, the subject of today’s discussion, have been no exception.
Beyond the immediate threat of tariffs, lies the greater global concerns about a tariff engendered economic slowdown. The increasing hostility in Washington, and an unelected changing of the guard in Canada did nothing to help the confidence of North American markets.
Given that the medium and longer-term outlook for most commodities is attractive and particularly given that resource equity markets were cheap (relative to the broad markets, and the commodities themselves), I am deploying rather aggressively in this period of softness and volatility.
While the senior golds are up nicely, the junior and mid cap golds have lagged, presenting opportunities for investors, and takeovers.
North American oil and gas, but particularly Canadian oil and gas, appear cheap, although investor concerns about trump’s tariffs and Carney’s hostility to fossil fuels cause legitimate concerns. Despite an attractive mid-term outlook for uranium, weakness in the spot price has massacred uranium equities.
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TOP PICKS:
Sprott Inc. (SII TSX)
Sprott is a lower risk way to play a precious metals and resources bull market. The company manages in excess of US$30 billion. This is a capital light, high margin business. As commodity prices, and commodities linked equities prices increase, the companies AUM and fees increase much faster than expenses. In addition, in a commodity bull market, the Sprott name, synonymous with resources and precious metals, should command premium multiples.
Meteoric Resources (MEI ASX)
Meteoric is an Australian listed junior that has released the equivalent of a PEA on a world class rare earths discovery, in Brazil. This discovery sets the standard for rare earth development opportunities globally. Rare earths are roundly hated by investors, despite their growing strategic importance, which is one reason why I am drawn to them.
Africa Oil (AOI TSX)
Africa Oil is a Lundin sponsored oil producer focused on Nigeria, and to a lesser extent, Namibia. The company recently consolidated its interests in Nigeria, and will now actively return capital to shareholders, through dividends, and share buy backs. The stock trades at half our estimates of net present value, with very strong shareholder returns, and exploration upside.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| SII TSX | Y | Y | Y |
| MEI ASX | Y | Y | Y |
| AOI TSX | Y | Y | Y |
PAST PICKS: May 31, 2024
Dundee Corp. (DC.A TSX)
- Then: $1.37
- Now: $1.94
- Return: 42%
- Total Return: 42%
I-80 Gold (IAUX NYSE)
- Then: US$1.09
- Now: US$0.70
- Return: -35%
- Total Return: -35%
Bravo Mining (BRVO CVE)
- Then: $3.80
- Now: $2.19
- Return: -42%
- Total Return: -42%
Total Return Average: 40%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| DC.A TSX | Y | Y | Y |
| IAUXNYSEAMERICAN | N | N | N |
| BRVO CVE | Y | Y | Y |
