"Global steel producers are thriving, and their stocks are hitting new highs," note Yiannis Mostrous and Roger S. Conrad, who add, "But the best is yet to come."
In the industry-leading Personal Finance, the two advisors explain, "We're still in the early stage of a truly global bull market cycle for steel, and the companies best positioned to take advantage are headed a lot higher." Here, they look at their "Iron Five."
"As is the case with other building blocks of economic growth, steel is enjoying explosive demand from the developing world. And with the world expanding as never before, steel companies are literally selling as fast as they can produce.
"In the August 2007, we highlighted five first-rate global steel producers. Since then, they've returned an average of 67.4%, versus a decline of 3.7% for the S&P 500.
"The Iron Five are five picks that we believe are ripe for even bigger gains. Like the last group, these stocks are often volatile. They're also vulnerable to the possibility of a general stock market slide and most of all to a dip in global demand growth, particularly from China.
"USEC (NYSE: USU) is the nation's leading supplier of enriched uranium for use in commercial nuclear power plants -- in fact, it is the only supplier," notes value investor Nathan Slaughter.
In Half-Priced Stocks newsletter, he explains, "Low-enriched uranium is commonly used as fuel in nuclear reactors, and no other company in the U.S. provides it, giving USEC a dominant position in a key niche market." Here is his review.
"Its competitive advantage? USEC has the single best competitive advantage there is: zero competition -- at least in the United States. While the firm does have a handful of rivals overseas, it has reaped the benefit of being the lone U.S. supplier.
"The company has also been awarded lucrative contracts to perform work for the U.S. Department of Defense.
"The company also benefits from the nation's longstanding nuclear non-proliferation treaty with Russia. Specifically, it participates in the salvaging of old Soviet nuclear warheads under the 'Megatons to Megawatts' program, which essentially gives the firm a sharply discounted source of uranium.
"Luxembourg-based ArcelorMittal (NYSE: MT) is the only truly global steel manufacturer, operating in 60 countries on five continents," says Gordon Pape.
In his Internet Wealth Builder, he explains, "Like all steel companies, ArcelorMittal would be temporarily affected by a world recession but as a long-term international growth stock for your portfolio, it should be a winner."
"When you read through MT's 2007 annual report, you are left with the impression of a company with an insatiable appetite for growth. In just one year, MT entered into a joint venture deal for a steel mill in Saudi Arabia and built a new steel service centre in Poland.
"It also completed the acquisition of Sicarsta in Mexico, thereby creating that country's largest steel producer; received mining concessions in Senegal and purchased a 77% stake in a German gas distribution company to add to its regional energy network.
"It also bought a 51% stake in one of Turkey's largest steel companies and a 70% position in an Italian steel distributor; bought 100% of an Estonian steel galvanizing line.
"Most investors aren't able to grasp this commodities cycle's massive potential. The main reason is that few investors are willing to accept the big transformation that's taking place in several emerging market economies, led by China and India.
"We've been advocating this change for quite some time. And after several years of doing so, investors are more receptive. However, they're not totally convinced yet.
"This is the main reason this bull market in emerging markets and commodities has another strong leg up before it reaches all-time highs. But we're far from that point. Meanwhile, copper remains one of our favorite metals.
"Our long-standing recommendation to take advantage of copper's strength is Freeport-McMoRan Copper & Gold. Copper suffered from supply challenges along with investors' underestimation of its potential early in the year.
"One of my favorite was to play the market is to find a hot area and then invest in companies that provide products to support that market," says Dave Dyer.
In The Dave Dyer Newsletter he explains, "Bucyrus International (NASDAQ: BUCY) is a domestic heavy equipment manufacturer that is focused exactly in the areas that will benefit from the global commodities boom.
"The company's products are focused on mining for coal, iron ore, copper, oil sands, and other minerals needed to support the global infrastructure expansion. Mining is hot right now, and all mines need mining equipment. "Rapid industrial expansion in Asia and Eastern Europe requires raw materials. This trend is not likely to stop soon.
"BUCY is a very old company. In 1880, they started as a small foundry in Bucyrus, Ohio. By 1904, they were supplying excavation equipment for one of the largest projects in the world, the Panama Canal. By 1969, they were making earth moving equipment that was almost 22 stories tall. If you need to dig a really big hole, talk to BUCY.
"The co-editors of Vital Resource Investor caution that "no market moves in a straight line, and in commodities, the action is often extremely violent." However, for long-term investors, they offer some favorites in iron ore, aluminum and copper.
"All commodity bull markets are ultimately gored by demand destruction, alternatives and new supply. But it will almost certainly be years before that happens to this one. And that means plenty of money will be made along the way.
"We're still extremely bullish on iron ore as the market remains in deficit and prices continue to rise. Chinese domestic supply has been falling and, if this continues, imports will make up the difference, thereby helping the miners.
"China consumes 51% of the world's iron supply. Portfolio holding Companhia Vale do Rio Doce (NYSE: RIO), the world's largest iron ore producer, will benefit from the shortage in iron ore supply.
"We favor aluminum in the industrial metals sector. We've been advocating aluminum for some time, and the market's finally going our way. Aluminum prices have been impacted by lack of available power in China and South Africa and higher alumina and bauxite prices.
"You must own some gold in this economic environment," emphasizes natural resources authority Larry Edelson who sees the recent setback in gold prices as "an ideal time to buy."
"Gold represents the epitome of the natural resource boom. It is the world's best barometer of inflation and financial crises. When inflation is on the rise, as it is now all over the world, gold thrives.
"And when there are financial crises, as we now have with the plunging dollar and the meltdown in the mortgage markets in the U.S. - gold gets an extra boost. Savvy investors flock to the safety of the precious metal, pushing its price even higher.
"In addition, there's more to the bull market in gold than just inflation and financial problems in the United States. Three billion new consumers in Asia are buying gold hand over fist! Previously in China, investors were not allowed to own gold. Now they can, and they are buying up gold like crazy.
Well folks, I have been following Anglo American plc (ADR) (NYSE: AAUK) for quite some time now. We own it in one portfolio, but recently I missed what now looks like a great opportunity to load up on it for the long haul.
In January the stock was trading under $25 for a few days but I was on vacation -- I'm forced to take one every so often by my family, I'm sure some of you know how that is. This was the week the DJIA dropped over 500 points one day when Bernanke dropped the Fed rate by a full point.
When I returned I set a stock alert for $26 per share thinking this would be doable. Unfortunately the lowest price it was available at in February was $27.20, intraday, on the 5th. It has only gone up since and closed yesterday at $33.28. It is trading up $1.35 mid-day to $34.63. All I can do is keep watching for another opportunity and be patient.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.Disclosure: I own shares of AAUK.
"Within a diversified portfolio of resource stocks, I like to have some small bets on the little guys," says Curtis Hesler, a noted authority on natural resource investing and the editor of The Professional Timing Service.
"Some of the smaller and, admittedly, more speculative exploration companies did not follow the mining sector during the August-November rally. This is not unprecedented.
"This failure to 'join the party' reminds one of what happened in 2005 when the lower tier gold miners failed to participate (some crashed severely) while the majors were strong. Most of them more than made up for it during 2006 when the mining stocks surged again.
"Everyone has a different financial circumstance, so you will have to decide what a prudent wager on these will be for you individually. There is risk here, but the juniors certainly do beat buying call options, and they do apppear to be poised for superior performance in 2008.
"Currently, I favor Taseko (ASE: TGB) and Great Basin Gold (ASE: GBN). They are our most recent lower tier recommendations They are buys at $4.50 and $2.45, respectively.
For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"The momentum for large-cap gold producers looks very bullish and my top speculative idea for 2008 is Yamana Gold (NYSE: AUY)," says Eric Roseman, editor of Commodity Trend Alert.
"Based in Toronto, Canada, Yamana is a large-cap gold-mining company with probably the best exploration portfolio in all of Central and South America.
"Yamana Gold had been heavily battered due to its buyout of Meridian Gold and Northern Orion. With these acquisitions now completed, the overhang of merger uncertainty has been lifted and the stock has sharply rallied off its 52-week low.
"The big picture for Yamana is a great portfolio of first-rate mines in Central and South America, booming earnings, rising positive cash-flow and production costs of $339 per ounce.
According to Roger Conrad and Yiannis Mostrous, "Resource stocks are by nature volatile. The important thing is we're still very much in a long-term bull market. And when the market mood does shift, today's pain will convert very quickly to massive gain."
In Vital Resource Investor they explain, "There is ongoing consolidation in this sector and the recent setback in stock prices make deals more attractive for acquirers." Here, they look at Companhia Vale do Rio Doce (NYSE: RIO), a play on consolidation in the iron ore industry.
"And when the market mood does shift, today's pain will convert very quickly to massive gain. The long-term underpinnings for vital resources are strong as ever: Soaring demand from the world's emerging growth engines, a growing scarcity of easily accessed supplies, rising development costs, resurgent resource nationalism and ongoing sector consolidation.
"It's this last trend that's captured our attention lately. Importantly, when it comes to developing vital resources profitably, size is essential. This year has already witnessed two mega-deals: Freeport Copper & Gold (NYSE: FCX) has bought Phelps Dodge and Rio Tinto (NYSE: RTP) purchased Alcan.
"And we're certain to see many more announced in coming months. The recent dance between BHP Billiton (NYSE: BHP) and its giant rival suggest the need to get bigger is greater than ever. Even if it doesn't succeed, the proposed merger is already increasing rivals' urge to merge.
China Investment Corp, which manages China's foreign exchange reserves, and China steel companies Baosteel Shougang Group and Angang Steel are said to be working on a bid for Rio Tinto (NYSE: RTP), Forbes reported Monday, citing China Business, the state-owned Chinese weekly. Rio denied receiving an approach from Chinese investors, Agency France Presse reported.
Deal talk had sent Rio's shares up about 7% in Australia early Monday. However, in the U.S., there was little follow through: Rio's shares fell $2.20 to $433.85 in mid-day Monday trading.
Earlier this year Rio rejected an offer from BHP Billiton (NYSE: BBL), saying BHP's offer undervalued the company. Two subsequent requests for talks by BHP were also turned down.
The market's choppy/consolidating (or perhaps worse) period continues. No single market participant can change that reality, but you can make the best of it -- specifically by looking for bargains.
Miner Freeport-McMoRan (NYSE: FCX) is one such opportunity. Freeport is the world's second-largest copper producer and a major miner of gold and molybdenum. Further, FCX's purchase of Phelps Dodge in March 2007 means that the company now has proven and probable reserves of: copper, 75 billion pounds; gold, 128 million ounces; and molybdenum, 1.9 billion pounds, net minority interests.
But perhaps most important, Freeport is one of only eight companies that have the economies of scale to compete in the global mining sector of the early 21st century. Look for continued merger/acquisition talk in the sector, but don't think of Freeport as an acquisition play: FCX has a large portion of the global copper market, geographical diversification, and enduring relationships with key customers, among other strengths, to continue to perform well in the years ahead.
Dan Sullivan, a specialist in relative strength rankings, maintains a position in Freeport-McMoRan Copper and Gold (NYSE: FCX) in his model portfolio. The editor of The Chartist explains, "The world's largest publicly traded copper company, Freeport-McMoRan operates large, long-lived and geographically diverse assets around the world.
"The company owns significant proven and probably reserves of copper, gold, and molybdenum and has an extensive portfolio of expansion and growth projects.
"The company conducts its operations primarily through its principal operating subsidiaries, PT Freeport Indonesia, Phelps Dodge, and Atlantic Copper. PT Freeport Indonesia's principal asset is the world-class Grasberg mine which was discovered in 1988.
"This mine contains the world's largest single copper reserve and the world's largest single gold reserve. It is also a 25% owner of PT Smelting, which operates a copper smelter and refinery in Gresik, Indonesia.
"Phelps Dodge is a fully integrated producer of copper and molybdenum, with mines and processing facilities in North and South America and Europe. Atlantic Copper operates a copper smelter and refinery in Huelva, Spain.
"The company's second-quarter profit surged year-over-year due to the acquisition of Phelps Dodge and increased metal pricing. Net income rose to $1.10 billion, up from $367 million in the year-ago period. Revenue also surged to $5.81 billion, from $1.43 billion last year."
Each day, Steven Halpern's TheStockAdvisors.com website features the latest investment commentary and favorite stock picks of the nation's leading financial newsletter advisors.
Among resource plays, international investing expert Nick Vardy says, "Mechel Open Joint Stock Company (NYSE: MTL) is one of Russia's largest mining and metals companies a producing steel, as well as processed coal and metal products used in mining industries.
In his Global Bull Market Alert, the advisor explains, "Mechel's rise from relative obscurity has been rapid. Rising metals prices and industry consolidation have more than quadrupled Mechel's sales from a mere $1 billion in 2001 to $4.4 billion last year.
"In announcing its first half 2007 in October, Mechel confirmed that its breathtaking growth still is on track. Both business segments -- mining and steel -- demonstrated high operational results. Crude steel production was up 4% year-on-year, with rolled products up 11%. Coal output rose 10%, driven by a 29% rise in steam coal output. Nickel output also rose 22%.
"But it was the company's financial results that knocked analysts' socks off. Revenue rose a whopping 55% to $2.99 billion during the first six months of 2007, compared to the same period of 2006. Earnings before interest, taxation, depreciation and amortization (EBITDA) rose 136% to $813.7 million.
What's a value investor to do, my oh my...
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