The Incredible 9-Bagger of the Tech Rally

The greatest outperforming stock of this impressive tech rally is decidedly low-tech.

Technology stocks have been on an absolute tear, with the Nasdaq surging on the strength of earnings from leaders like Apple (Nasdaq: AAPL  ) . While Apple shares have recovered comfortably from their March lows, the real star of the tech rally doesn't trade on the Nasdaq at all, although the way this company has transformed itself to stay alive was nothing if not innovative.

Meet the new Teck Resources (NYSE: TCK  ) , whose share performance of late has been so astonishing that we simply have to call it a Teck rally!

When a series of crafty moves began to dampen concerns about the company's sizeable debt load back in March, Teck Resources shares launched into the broader equity rally with the fuel of a cleaner balance sheet, and in less than five months, they have increased ninefold from the March low of $2.61. Reporting adjusted net earnings for the second quarter of $213 million, the company now reminds us that profitability for this once and future mining giant was never really in question.

Teck mines primarily copper and coking coal (used in steel furnaces), plus a fair volume of zinc. Copper prices remain well below their 2008 highs, but resurgent demand from China has boosted miners like Freeport-McMoRan Copper & Gold (NYSE: FCX  ) and Southern Copper (NYSE: PCU  ) back into the limelight. Unfortunately, Teck's important Highland Valley copper mine in British Columbia has suffered a major setback. Structural deficiencies in some of the pit walls require remedial action spanning some 18 months, with an anticipated 26% reduction of 2010 production from 2009 levels.

China's appetite for coking coal has absorbed much of Teck's reduced shipments to U.S. and European markets, and now has the company reversing some prior production cuts. With several mines in British Columbia, Teck is far better positioned geographically to redirect production to China than Appalachian miners like Massey Energy (NYSE: MEE  ) . Recently announced haulage contracts with Canadian National Railway (NYSE: CNI  ) and Canadian Pacific Railway (NYSE: CP  ) will shave more than $70 million from 2009 transportation costs.

Thanks in part to a strategic investment from China's sovereign wealth fund, Teck Resources has chipped that daunting debt down to $8.9 billion, and a large note issuance bought the company some valuable time. Though the debt remains a heavy burden to carry, the Teck rally may yet outshine the tech rally.

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Over at CAPS, more than 1,200 members have rated five-star pick Teck Resources Limited an outperform. Whether you think Teck will succeed or fail, please come share your thoughts and counsel with our community of investors. CAPS is free and fun!

Fool contributor Christopher Barker is the commodore of copper and the Colonel Klink of zinc. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Freeport-McMoRan Copper & Gold. Apple and Canadian National Railway are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool's disclosure policy wears a helmet and a head lamp.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 24, 2009, at 11:36 AM, plange01 wrote:

    the car rental stocks (dtg) and (car) are still on fire! these stocks are just into their best season and have a lot of upside left..watch out for hedge(trash fund) controled..(htz) to much debt!

  • Report this Comment On July 24, 2009, at 4:31 PM, alexreising wrote:

    Hey divman. I'm tired of your lame postings touting your website. The website looks extremely amature and I challenge you to add transparency to the methods that you are trying to peddle.

    You post way too much and you link to this site, but you never add posts with any substance and you have ZERO credibility in this community.

    For your information I bought TCK at $5, sold covered calls on it and finally got called out of my shares in the low $20's, yielding a REDICULOUS ROI.

    So don't be a hater, because anyone with the balls and the intuition to catch this rally in March or April is rolling in the dough right now, and people that held their trusty, yielding DRIP stocks got pillaged and raped with their buy, hold and forget philosophy and are probably only now back to the halfway point.

    If you have such a good method why don't you post some results and a snapshot of your ideas on a blog and establish some credibility?

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