Disclosure: The following represents my opinions only. I am long ATH.TO, ATU.V, B.V, BTE.TO, CJ.TO, CPI.TO, DCMC.V, ERF.TO, FOM.V, GIII.V, MEG.TO, NTR.TO, NXE.TO, TAO.V, TECK.B.TO, TGL.TO, TPL.V, TRP.TO, U.TO, VONE.V, WCP.TO, and YGR.TO (Image credit to Michal Parzuchowski on Unsplash)
A little over a year ago, I invoked the great wisdom of Chumbawamba (“I get knocked down, but I get up again…”) after a disappointing 2019. I guess that you can analyze markets and stocks all you like, but sometimes you also need to listen to whatever theme song your inner DJ puts forth. Well, after some insane action in 2020 that turned out pretty well — through luck, skill, or a little of both — lately the spirit of Kenny Rogers’ The Gambler has been rattling around my head…
“You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
And know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealin’s done“
While most people were whipsawed in one of the most brisk and violent market corrections in history in 2020, as long you got back up on the horse by summer time, most unwarranted market wounds have likely been healed by now — and then some. In sticking with my ox-like nature for 2021, I’ve shifted things around a little here and there, but generally I’m a broken record. Energy and materials remain front and centre in my holdings and I’m seeing good volume and price action in a lot of things. It’s been a long time since I’ve felt a market like this for these sectors. This is the kind of market that tests your ability to remain objective about valuations, and trying to remember a forgotten time when resources were cool and didn’t trade at nobody-cares-about-this-sector multiples. I think this is why Kenny Rogers keeps popping into my head. If you know what you own, why you own it, and what you think fair value is; you’re ahead of a huge percentage of the market in terms of knowing if you still want to hold it. Typically, buying stocks that trade at 50-200x earnings (that’s me knocking a lot of the tech sector) is typically not a path to long-term wealth creation, because when the sh*t hits the fan — and it always does eventually — those are often the kinds of positions that crumble under a stampede of panic selling. Call me old school, but I think that the word “value” should at least be considered in the context of any position. So to bring it back my inner DJ’s song choice, how do I know when to hold ’em and when to fold ’em?
Honestly, I don’t. You never sell it all at the top and you never buy it all at the low, well almost never, but you get my point. All I can say now is that copper stocks have had HUGE runs over the last year. If all you did was buy and hold Freeport (FCX.US, last at $38.90) during the 2020 market implosion, you’d be up ten times on your money. Same with Capstone (CS.TO, last at $5.33) and Copper Mountain (CMMC.TO, last at $3.90) here in the Canadian market. Companies that looked like questionable going concerns a year ago are now printing money, and the copper price is nearly $4.50 per pound. Oh how times have changed. Can you hear that? In my own tone, there’s a sense of high spirits and big wins when I think or talk about copper. That tells me that we are well-advanced in the copper trade. I’ve read that “copper is the new oil”… and when I start reading catch phrases like that, I know that the generalists have arrived and are buying names like those mentioned above for the first time.