Switching Sides

The local market has been outperforming peers lately and buyers have overwhelmed sellers as of late. I was very much surprised with some of my favorite picks, such as AP, DMC, EDC, MBT, and SCC. They have all outperformed the index and have performed very well near their support levels (some have even broken through multiple resistance). I, however, am inclined to steer away from my usual favorites in power generation, holdings, and financial; and have started to closely monitor the mining industry.

The mining industry is favored by a very large group of investors, simply because of the high risk/reward these companies can generate. Take PX for instance, I remember purchasing some shares for 3 pesos and added to it at 6/sh, when MVP decided he wanted a slice of Philex, the stock shot up to 19/sh in a matter of months. Of course, there were others who decided that it was worth so much more and lost money when the price dropped to 14/sh. Now, this was an unusual case of speculation driving prices. I am not advocating buying due to speculation, I am simply showing how the risk/reward balances each other out in the mining industry.

I am still a strong advocate of investing in companies with strong numbers (fundamentals). The reason I have started to look into the mining industry is that the rising prices of commodities is happening all around us. Copper, Nickel, Gold, etc; their price action just cannot be ignored. Take for instance electrical wires, prices have shot up more than 60 percent in less than a year; the most basic commodity used aside from the insulation is copper!

A few things to remember with the mining industry.
1.) Profits are very much reliant on commodity prices
2.) Shipments come in bulks and they have to be consistent
3.) Resources are finite.

All these things play a part in determining the profitability and attractiveness of the company. Recently, I've been looking into AT, PX, NIKL, and SCC (obviously). These companies have proven track records of shipment and commodities they mine are in demand worldwide. But don't take my word for it, do your homework.