Despite most forecasts for commodities in the industrial space being flat to down and the belief there are more opportunities for the precious metals producers, a barbell approach to the mining and metals sector with equal ratings on both segments is favored to hedge one’s bets, says Jorge M. Beristain, Managing Director at Deutsche Bank Securities Inc.
“Frankly, we still don’t know which way the world’s going to shake out in the next few years. The cumulative effects of all of the monetary quantitative easing that we’ve seen in the U.S., Europe and Japan aren’t known,” he said. “I think that inflation driven by quantitative easing could be a reason why investors want to own either industrial or precious names.”
Beristain picks Barrick Gold Corporation (ABX) as a favorite name on the precious metal side. He says they company is the world leader in gold production and the largest company by market cap, but it has also diversified somewhat into the base metals space through an acquisition in 2011.
“That has raised their nongold exposure to about 20% of revenue. On the gold side, I think they have some fairly attractive and large-scale projects. They own and/or will consolidate something like four of the top 10 largest gold mine projects in the world, and they also have a track record of execution at the mine level,” Beristain said.
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