Credit Suisse Picks Gems In Mining Sector
Trying to eke out gains from mining stocks in 2015 could prove a tough task for investors, a group of analysts said Tuesday.
After four years of below average returns, the sector continues to face slowing demand, oversupply and narrowing margins, according to a group of analysts at Credit Suisse.
The SPDR S&P Metals and Mining ETF (NYSE: XME) is off nearly 29 percent in the past 12 months and the sector's general outlook remains cloudy at best.
In picking through the sector, Credit Suisse prefers companies with strong balance sheets and cash flows, and exposure to precious and base metals over iron and other bulk commodities.
Among base metals, the group likes exposure to zinc and nickel more than copper and aluminum, and recommends both MMC Norilsk Nickel with its relatively strong free cash flow and dividend yield, and Boliden AB (OTC: BDNNF) citing its outlook for strong growth in earnings and cash flow.
For diamond lovers, Credit Suisse suggests a look at Russian producer Alrosa (MCX: ALRS), with its strengthening cash flow and dividends, plus an expected 3 percent annual gain in price for the gemstones.
Aquarius Platinum's (OTC: AQPTY) cash flow and growth potential, plus its relatively low valuation may make it attractive to those favoring the company's namesake metal, the analysts said.
With regard to gold miners, Agnico Eagle Mines Ltd. (NYSE: AEM) is likely to offer improved 2015 guidance and Credit Suisse analysts said a recent selloff in the company's shares is "overdone."
On iron ore, the analysts are "structurally bearish," while turning to coal, lower demand from China "could sustain the current market surplus," the analysts said.
Among coal miners, the analysts like Adaro Energy (OTC: ADOOY) as a low-cost producer that expects to increase the volume of its production.
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