UN­DER PRES­SURE

Finweek English Edition - - INVESTMENT -

Sin­gle-com­mod­ity producers (whether gold, plat­inum, iron ore, su­gar, etc.) are great stocks to hold when the com­modi­ties that they pro­duce are un­der­go­ing a sig­nif­i­cant bull run. It is a strat­egy of mine to buy the best of bread in the space when the com­mod­ity is run­ning, but at the first sign of any weak­ness I bail. Com­mod­ity com­pa­nies are price tak­ers and when the price is in bull phase that’s great, but as soon as any weak­ness starts to set into the price the com­pa­nies find it tough. Rev­enues drop (un­less they can ramp up pro­duc­tion) and costs con­tinue to in­crease, leav­ing them squeezed. We’re see­ing this with Kumba Iron Ore, a stock I held un­til the first weak trad­ing up­date and I bailed. We re­cently saw another weak up­date − the stock is un­der pres­sure and is likely to re­main so.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.