A poor AGM season means Opportunities for Under the Radar subscribers26.11.2012

Radar believes that the place where the place where the fastest growth will occur is the small cap resources companies that have secured a path to production through adequate funding. These companies are out there and they will be the big beneficiaries if commodities prices show any sign of life in the next 12 months.
In some cases, Radar is spotting these companies trading at big discounts to the replacement value of their production plants!
I hear what you're saying: What about all the doom and gloom in Europe? Isn't America, still the world's biggest economy, going to fall off the fiscal cliff? Isn't China's growth coming off?
Radar has two words for you: priced in.
As a fund manager said to me, on the demand side, “if these economies muddle through, it won't take much in terms of growth to see commodities prices maintain their current levels because there is so much despair out there.”
On the supply side, it's actually a positive to see the big resource giants like BHP Billiton and Rio Tinto pulling or delaying big projects. This means that the supply of commodities such as iron ore and coal will remain tight for years to come.
Long before the stock broking analysts raise their commodity price assumptions and increase their net present values (NPVs) for the miners, it will be reflected in the share prices. And the big returns will be in the little miners. In the words of yet another small cap fund manager:
“The smaller miners are producers with enormous leverage. You're talking about a 10-bagger if commodities move up and the production issues get sorted out.”
We have two such small miners in our next issue due on Thursday, so watch out!
Best wishes

Richard Hemming

About the Author

Richard Hemming

Investment analyst and Editor of Under the Radar Report

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