Basic Point INVESTMENT RECOMMENDATIONS
(I figured out how to copy pdf to a text file and then cut and pasted page 31 here. Kipp)
1. When the Fed and ECB finally switch to easing, they will unleash a new
kind of commodity stock bull market—one driven primarily by
multiple expansion, rather than by soaring commodity prices. Investors
who accumulate the best-situated mining and oil stocks while the
market still values them as no better than homebuilding companies can
expect to profit handsomely.
2. The base metal mines’ shares will continue to be driven primarily by (1)
takeovers and rumors of takeovers, and (2) redeployment by portfolio
investors of the profits from takeovers into a rapidly-dwindling supply
of quality mining stocks with long-lived unhedged reserves in politically
secure regions. One reason tiger poaching remains a problem in India is
that tigers are an endangered species, so their pelts and body parts are
extremely valuable. Similarly, good publicly-traded mining companies
are becoming an endangered species. Own them before they disappear
forever into the private preserves of powerful poachers.
3. OPEC’s cutbacks may soon bring global crude production into line with
very modest growth in demand. Oil stocks will not be market stars again
until investors conclude that oil demand runs ahead of global
production capacity, and OPEC once again becomes irrelevant.
4. Pfizer’s latest setback is bad news for stockholders and for sufferers from
heart disease. The highest-paid CEO in Big Pharma, a great marketer
who presided over five years of stock price decline, strikes investors
again—even after retiring. His successor, who qualifies for today’s kind
of pharma top job by having run a fast-food company, says he will
“transform” the company. Time was these companies were run by
cautious pharmacologists. We reiterate our view that Big Pharma stocks
are not growth stocks, but marketing-driven value stocks, and investors
have to be very picky to find real value—apart from dividends. They
should be evaluated like mature E&P companies—on the basis of
Reserve Life Indices. (E&P companies aren’t run by former pushers of
restaurant chicken.)
5. Gold shares are back in vogue as the metal responds to the drooping
dollar. They deserve an overweight position in investors’ portfolios—not
because inflation is going to reach levels that would scare more than
Ben Bernanke, but because the dollar will eventually reach depths that
will scare more than Ben Bernanke.
“Own them before
they disappear
forever into the
private preserves
of powerful
poachers.”
AI
