J.P.Morgan Makes Bullish Case for Commodities

POSTED ON September 30, 2013 BY Travis McPherson
CATEGORY Aluminum, Energy, Mining, Nickel, Oil and Gas,

(J.P.Morgan Natural Resources fund)

J.P.Morgan Asset Management’s James Sutton believes a recovery is likely for the macro-commodity sector as he sees significant returns in his natural resource funds. The J.P.Morgan Natural Resources fund is up nearly 18% since June, however it remains 50% below 2011 highs. This highlights an increased perception that commodity prices may have bottomed. Sutton sees generalist investors increasing their positions in the commodity sector for the first time in two years. Energy, precious and base metals prices are all bottoming, according to Sutton. Evidence of this is the fact that the MSCI materials sector was the best performing of all of the MSCI World in the month of August.

“At the stock level, we are finally coming to the end of a two-year earnings downgrades cycle in this sector,” says Sutton.

Glencore Xstrata (GLEN:L) the world's largest miner

He is seeing ‘bottom-up’ factors improving which is helping companies like Glencore Xstrata, which is his largest holding. On the oil front, prices have been largely range bound but he has seen success in companies which increased their focus on quality operations that offer efficient production growth and divesting assets that don’t. Sutton has seen generalist multi-managers increasing their exposure to the sector based on the attractive valuations offered and the fact that, he claims, "even on a dividend yield basis, you can make the case for owning the large cap miners."

The sweet spot sector which offers the most attractive valuations remain the small cap commodities stocks. He also sees future supply shortages in out-of-favor commodities like aluminum and nickel as major production is coming offline due to large commodity price declines.

Here’s the article: Viewpoint: What next for commodities?

Overall, all of this bodes well for the sector and, if he is correct (or close to correct), then M&A activity could pick up which would offer the small cap world catalysts to see their valuations increase. Although these US banks seem to flip flop on commodities more than US politicians do during election time; the fact that a major US bank realizes the value disconnect seen in the sector is positive for the sector. These large US banks are often the advisors to these 'real' money, generalist investors, which are the ones that offer the much needed source of capital for the sector as a whole.

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

Disclaimer:

Readers are advised that the material contained herein is solely for information purposes. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice. Nothing contained herein constitutes a representation by the publisher, nor a solicitation for the purchase or sale of securities. The information contained herein is based on sources which the publisher believes to be reliable, but is not guaranteed to be accurate, and does not purport to be a complete statement or summary of the available data. Any opinions expressed are subject to change without notice. The owner, editor, writer and publisher and their associates are not responsible for errors or omissions. They may from time to time have a position in the securities of the companies mentioned herein, and may change their positions without notice. (Any significant positions will be disclosed explicitly. This article is not intended to meet your specific individual investment needs and it is not tailored to your personal financial situation. Nothing contained herein constitutes, is intended, or deemed to be — either implied or otherwise — investment advice. Thomas Humphreys, Pacific Website Company Inc., and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. We reserve the right to buy and sell such securities or commodities without notice to readers. While the information herein is believed to be accurate and reliable it is not guaranteed or implied to be so. The information herein may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. Neither Thomas Humphreys, nor anyone else, accepts any responsibility, or assumes any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information in these publications or web site.

Forward-Looking Statements: This article may include certain "forward-looking information" within the meaning of Canadian securities legislation. Forward-looking statements include predictions, projections and forecasts and are often, but not always, identified by the use of words such as "seek", "anticipate", "believe", "plan", "estimate", "forecast", "expect", "potential", "project", "target", "schedule", budget" and "intend" and statements that an event or result "may", "will", "should", "could" or "might" occur or be achieved and other similar expressions and includes the negatives thereof. All statements other than statements of historical fact included in this release, including, without limitation, statements regarding the potential of the Company's properties are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are based on a number of material factors and assumptions. Important factors that could cause actual results to differ materially from Company's expectations include actual exploration results, changes in project parameters as plans continue to be refined, future metal prices, availability of capital and financing on acceptable terms, general economic, market or business conditions, uninsured risks, regulatory changes, delays or inability to receive required approvals, and other exploration or other risks detailed herein and from time to time in the filings made by the Company with securities regulators. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ from those described in forward-looking statements, there may be other factors that cause such actions, events or results to differ materially from those anticipated. There can be no assurance that forward-looking statements will prove to be accurate and accordingly readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date of this article. The Company disclaims any intention or obligation, except to the extent required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Always do your own due diligence. We seek safe harbor.