10.02.2022
The Commodity Super Cycle
The bull market in commodities has gained fresh legs. Qi’s Commodity Super Cycle watchlist includes a range of different ways investors can try & capture the move – commodities themselves, commodity currencies, ETFs plus resource stocks.
Relative to the broad macro environment, which commodity play is lagging the recent bull move? Which has already priced in a lot of the good news?
AUDUSD is 0.5 sigma (1.4%) below macro fair value. Not a huge valuation gap but unsurprisingly iron ore & copper rank amongst the top positive drivers. VIX & risk aversion is the other big driver so, for those who believe in commodity upside & “risk on”, Aussie offers a slightly cheap entry level.
Chilean miner Antofagasta has had its fair share of negative headlines of late - issues around water rights & pressure from environmental groups. Those idiosyncratic risks have resulted in the stock price lagging versus the macro environment. The stock is now one sigma (7.7%) cheap to model fair value.
Conversely, Copper & global copper miners COPX lie at the rich end of valuations. While they have moved ahead of fair value, model value is trending higher, it is simply that they have moved quicker than macro fundamentals. That suggests it is not yet a trade to fade; rather, from a macro view point, it is the least attractive to be chasing here, even for commodity bulls.
Chilean miner Antofagasta has had its fair share of negative headlines of late - issues around water rights & pressure from environmental groups. Those idiosyncratic risks have resulted in the stock price lagging versus the macro environment. The stock is now one sigma (7.7%) cheap to model fair value.
Conversely, Copper & global copper miners COPX lie at the rich end of valuations. While they have moved ahead of fair value, model value is trending higher, it is simply that they have moved quicker than macro fundamentals. That suggests it is not yet a trade to fade; rather, from a macro view point, it is the least attractive to be chasing here, even for commodity bulls.
