Agricultural Stocks And Precious Metals Miners Next Hot Stock Sectors
November 18, 2009 - The Wall Street Transcript has just published TWST Small Cap Value Report offering a timely review of the Diversified Investments sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
Complete details of the special report are available here or by calling (212) 952-7433.
James J. Puplava has been President and CEO of Puplava Financial Services, Inc. (PFS) since 1985. For 12 years, he held a position as Branch Manager for LPL Financial Services, LLC. In 1996, he incorporated the broker/dealer firm, Puplava Securities, Inc. (PSI) and is its President. He also serves on the Board of Directors for Kimber Resources, Inc. of Vancouver, British Columbia,Canada. He graduated cum laude in History and Economics from Arizona State University. He then went on to graduate summa cum laude with a Master's Degree in finance and Accounting from the American Graduate School of International Management (Thunderbird).
TWST: What are some of these opportunities that you have found over the last few months and what are the reasons why you found the companies attractive?
Mr. Puplava: Let's just take the agricultural space. As I mentioned earlier, there's a trend-and it's global-of an ongoing decline in the amount of arable land per person. This ratio peaked in 1970, and by 1980, there was less arable land per person than in 1970; the same thing happened in 1990 vs. 1980, and 2000 vs. 1990. 2010 vs. 2000 is predicted to continue the trend. So there are only two ways to increase agricultural output. One is to increase the amount of arable land devoted to crops; or two, to increase crop yield. So seed companies like Monsanto and Syngenta which provide seeds and products that can increase crop yield, or fertilizer companies like Mosaic (MOS), Potash (POT), and Agrium (AGU) that also affect land arability and yield, or companies like John Deere (DE) that help large farms' automation to increase output per field acre of planted crops are attractive.
We think the agricultural space is very undervalued right now and I don't think the market is paying a lot of attention to it right now. Even though some of the companies in this sector are up, they have not participated to the same extent that you've seen in other sectors. So, we still like agriculture. Another thing we think is that we are heading for a train wreck in the area of energy. Somewhere around the year 2011 or 2012, all of the recent cancellations of projects by major oil companies and national oil companies will start to cause another bottleneck in supply. We think the oil service sector will be one of the first sectors to benefit if that happens. If oil prices go up to 85 per barrel-and we think we could be looking at over 100 oil by the end of next year-the expansion of profit margins in the oil sector will be very promising. We believe that space offers an attractive opportunity for investors.
TWST: What about precious metals and gold? Gold of course has been going up and up as the dollar has been depreciating. What is your outlook there and have you found any companies to play that field?
Mr. Puplava: We still think we have a good possibility of hitting 1,250 or 1,300 gold in the next 12 months. In the gold sector, one of the opportunities we like is with mid-tier producers that are going to be able to increase their production over time. A company like Newmont Mining (NEM), whose production has peaked and who is having difficulty of replacing their reserves and increasing their production is still a fairly solid bet, but I think the outside performance is going to be in mid-tier producers who have the ability to increase their production.
A company like Minefinders (MFN), which went into production in the third quarter of last year, will be growing their production to close to 200,000 ounces-this is a company that is up 100% over the past year, although they did take a severe downturn in the sell-off last fall. Other companies like Northgate Minerals (NXG), which, even though one of their bigger mines will be going out of production by the end of next year, will be producing 400,000 ounces. They're also brining new mines on line. Yamana (AUY), which already producing a million ounces, will be increasing their production considerably over the next couple of years.
If I can draw the analogy to the bull market in technology in the 1990s, if you were in IBM (IBM), the big behemoth in the technology space, you made money, but the real money was made in Intel (INTC) Microsoft (MSFT) and Dell Inc. (DELL) or at Cisco (CSCO). These smaller companies that were able to grow their topline and also their bottom line over the decade were the real place to be; in a bull market you want to be in those companies that have the ability to grow their topline. In the mining space, that means either increasing production or reducing the cost of production. So, we like companies like a Minefinders, a Yamana, or a Northgate; and then in the larger-cap space, we like companies like a Goldcorp (GG), which is now a major producer, but is still a company that is going to be able to increase its production over the next 3 to 5 years.
JAMES J. PUPLAVA
Puplava Financial Services, Inc
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