However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.
There are 195 stocks listed under "metals & mining" in the CAPS' screener, but only more than a handful of them carry well-respected four- and five-star ratings. Those accolades mean our 180,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the ones below:
|
Company
|
CAPS Rating Today
(out of 5)
|
Recent Price
|
52-Wk. Price Change
|
Est. 5-Yr. Growth Rate
|
| Cliffs Natural Resources (NYSE: CLF ) |
**** |
$77.94 |
28% |
20% |
| General Moly (AMEX: GMO ) |
***** |
$3.52 |
13% |
NA |
| Silver Wheaton (NYSE: SLW ) |
**** |
$39.54 |
58% |
17% |
Source: Motley Fool CAPS; Yahoo! Finance; NA = not available.
International and financial worries are again gripping the market, but with the S&P 500 still up 9% over the last 12 months, it might not be so surprising to learn that the CAPS metals and mining stocks have done somewhat better, rising more than 14% in that same time span. So let's take a closer look at why investors think some of these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.
Some spring in its step
There will always be an ebb and flow to demand over shorter periods of time, but Rio Tinto (NYSE: RIO ) sees the long-term prospects for China's demand for iron ore in particular to remain exceptionally strong for at least the next eight years.
Pricing of iron ore and coking coal avoided the wild swings some commodities suffered in the midst of recent market volatility, which bodes well since analysts at Goldman Sachs see demand strengthening next year in more mature markets like Japan and Europe.
Probably of more immediate concern to Rio, BHP Billiton (NYSE: BHP ) , and Cliffs Natural Resources is the tax Australia wants to levy on carbon producers. Apparently raising taxes in a recession is becoming a popular policy prescription, though likely a ruinous one. BHP reported record profits last month while Cliffs saw net earnings jump 56% year over year.
With 97% of the 1,376 CAPS members weighing in on Cliffs rating the miner to outperform the broad market averages, it's apparent they think the growing demand will prop up the company. Let us know on the Cliffs Natural Resources CAPS page whether you think the miner can continue to grow profits.
A rare opportunity?
Speaking of miners, whatever the potential is for development stage molybdenum miner General Moly, it's still several years away from fruition. The best thing it has going for it right now is its Mount Hope project, the mine in which Korean steel producer POSCO (NYSE: PKX ) has a 20% stake, but that isn't expected to yield its riches until 2014 at the earliest, while its Liberty mine is further out still. Money invested here will likely be dead for a while.
The General has arranged for financing with a Chinese lender to get it through to production, in exchange for which it has agreed to take much of the mine's eventual molybdenum production. A quarter of that production, though, is for guaranteed rates that are currently 50% or more below market rates. The balance will be at the spot rate.
The gains General Moly's shares currently sport are only as a result of a mistaken belief it was a rare earth elements play. Earlier this year, a REE mania gripped the market and any stock with even the most tangential relationship to them soared. They've all since returned to earth.
I'm in the minority on CAPS, where I've marked the miner to underperform the market. Some 97% of the more than 500 members weighing in think it can still beat the Street. Tell us on the General Moly CAPS page whether you think it will make it through to opening its mines.
In silver we trust
With its massive profit margins and potential for serious dividend growth, Silver Wheaton is a gold mine of opportunity among silver plays.
Like gold, silver is seen as a high-quality asset to invest in and a means of diversifying your portfolio. On a broader scale, it is seen to a lesser extent as an alternative currency play as well. Yet with nearly half of the demand for the metal coming for its industrial uses, it more accurately reflects the state of the world economy than does gold. When industrial markets are in decline, silver prices will be too.
Silver Wheaton is able to dodge a lot of that because of its low, fixed-cost business model that allows it to turn $0.82 of every dollar generated into profit. Its closest production-scale competitor, Pan American Silver (Nasdaq: PAAS ) , turns less than a quarter of sales into profits. Which means the macroeconomic pressures on sovereign debt herald a bullish opportunity in silver, and in Silver Wheaton.
Because its streaming business avoids many of the risks associated with mining, CAPS All-Star Chemdawg finds the recurring profit potential great: "As silver goes up ... keep cashing the royalty checks minus the picks and shovels associated risks."
Follow Silver Wheaton's progress by adding it to the stream of stocks you follow on the Fool's portfolio tracker feature.
The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.
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