Resource companies vs. Commodity prices

[Ghetto23]

Not sure if this has been done in this format but I was just thinking...

In your opinions, which are the companies best-poised if there was an increase in the price of certain commodities (if it was to happen now)?

i.e. If the nickel price was to continue to rise who is in a position to capitalise on it in terms of share price, company prospects etc?

Please include why if possible?

 

[alphaman]

Re: Resource companies vs Commodity prices

Probably Minara. Not because it has the best prospects, but because the share prices of a marginal producer such as MRE tends to get most leverage to changes in commodity prices.

It also gets additional leverage from its low share price.

 

[Ghetto23]

Re: Resource companies vs Commodity prices

Thanks Alpha - nickel-wise I like WSA and MCR more than MRE, considering they are making money at current nickel prices.

Anyone have any ideas for other commodities - copper, lead, zinc etc.?

 

[alphaman]

Re: Resource companies vs Commodity prices

See MRE's huge move?

Everyone knows WSA has better quality than MRE. But you were asking about share price, so as I said, MRE gets more leverage.

When the current bear rally ends MRE will crash back down just as fast (unless someone decides to take it over). That's how leverage works.

 

[skyQuake]

Re: Resource companies vs Commodity prices

Keep in mind a pure play commodity share behaves similar to a call option on the commodity itself.