Portfolio Update

Stay with the Miners

With this year’s fourth quarter around the corner, we maintain a positive view on the miners. The majority of our preferred global macro indicators are holding well–especially GDP growth and manufacturing PMIs.

Furthermore, the mining sector still trades at a deep discount to the market, even after the recent strong rally. And because a lot of metal prices still show signs of strength, corporate earnings should soon follow.

As we’ve noted before, mining companies have been cutting capital expenditures faster than a lot of investors expected. And that’s while demand has surprised on the upside.

Companies have also substantially cut on the exploration front. Exploration budgets have fallen from around $21 billion in 2012 to around $7 billion as of the end of last year. As a result, replacing current reserves is increasingly difficult. In some cases, the strong demand is pushing prices higher faster than investors expected.