Seeking Alpha

john71701's  Instablog

john71701
Send Message
  • A Copper Rally In The Offing 0 comments
    Dec 18, 2012 1:16 AM

    Investments in Copper mining companies may require a certain insight for stock picking, yetare an exciting and unique approach to play the metal. Factoring in an improved housing scenario in USA along with the demands from emerging economies, one may infer logically that the spot prices of Copper must respond positively.

    In wake of any upcoming rally, a strategic entry into Copper miner stocks and funds will post better returns than the physical metal or its benchmark index itself.

    The Miners v/s The Metal

    Exposure to selected Copper equitiesmay be placed more favourably than commodity investments,partly because of the miners' vested interests in the other precious metals like Gold and Silver and majorly due to the traditional hedging practices they use to increase the net exposure. As with all other miners, Copper miners too enjoy a significant First Movers Advantage.

    Copper and the Housing Market:

    The metal is crucial for economic growth and for these very reasons most market pundits observe supply and demand figures of Copper to evaluate the overall health of any economy. Apart from being a very familiar asset for investors who are long on the Commodity Invest, the base prices have quadrupled since 2002 and majority of commodity market cash in-flows have happened via Copper. Be it any major exchange.

    However, keeping the past returns aside the strongest indicator for a future Copper price surge is an improving Housing Scenario in America and subsequently in BRIC nations like China, India and Brazil. In USA alone almost 41% of Copper produced is absorbed by the home and office construction companies and this is when the copper used in the appliances and air-conditioning machines is not included.Demands of similar companies from the BRIC countries may also shoot up, considering the huge gap in housing supply and demand of these nations. A Copper up rise is most likely as the developing economies are using almost 9 times less copper than the developed economies but their urban population alone is more than twice the total headcount of most industrial countries.

    This aberration itself presents a higher potential for upside and moreover the infrastructure revolution that is now synonymous with likes of China, India and even some of the Frontier nations will lead to demands of Copper that will clearly beat the Industrial Output figures.

    The lows of 2012 present a double digit return opportunity for players who are convinced with housing up rise and an eventual Copper rally that will benefit all those engaged in Copper Production and Exploration.

    Stock wise, one can look at major Copper producing companies like Polska Miedz, Xstrata, BHP Bilton and Southern Copper Corp., which even today are accounting for a sizable share in global production. Another unique play on this side of the market is INMET Mining Corporation which has created enough buzz owing to news of a Quantum take-over bid being exercised on it.

    Although a broader investor eyeing more than the physical metal may consider the Copper ETF tracking the Solactive Global Miners Index. This single investment will capture the essence of the global mining industry offering a combined stake in most of the major copper mining corporations of the world. Solactive Index based fundsmay also produce serious dividends as most senior miner equities are associated with an yearly yield which is upward of +4%.

    Global X Copper ETF [COPX] attunes to the performance of Solactive Global Miners Index. Inmet Mining Corporation is the top asset for the fund due its recent price rise. The fund issuers charge 65 basis points from the investors and offer stakes in the companies like Polska Mieidz, Hudbay Minerals among others. For known reasons, 43% of the assets under management are concentrated in Canada.

Back To john71701's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.