The case for copper

I'm continuing my recent e-mail series of highlights from last week's 20th annual Value Investing Seminar in Italy...

Today, I'll share highlights of a presentation given by Nic Van Broekhoven on Thursday. He's the founder of Singapore-based private investment holding company Olija Holdings.

Nic started by sharing a personal example of one of my favorite themes: the wealth-building power of buying the stocks of high-quality growth companies and holding them for a long, long time.

He bought $500 worth of Nike (NKE) in 1992 – and still holds it to this day. This year, he's going to collect $888 in dividends, and he has earned a return of 86,715%!

He then presented a slide that echoed what I wrote yesterday:

I believe we're in the early stages of an "Energy Supercycle" that's part of a larger commodity supercycle that could last for decades.

To support his bullishness on commodities, Nic showed this fascinating chart I had never seen. Tracking back to 1981, it shows what percentage of the total capital expenditures ("capex") of the S&P 500 Index companies is accounted for by tech and commodities companies:

As you can see, it was a great time to sell tech stocks and buy commodities stocks at the peak of the Internet bubble in early 2000... and a great time to do the reverse at the bottom of the market in early 2009... And now, this metric indicates that it's once again time to sell tech and buy commodities.

To reinforce his bearishness on the tech sector in general, Nic also showed this chart:

He then presented a number of charts showing a huge surge in prices in recent years in commodities like oranges, coffee, and uranium.

Nic then asked the key question: "What commodity will spike next?"

His answer: copper.

I agree completely – it's a theme I've been writing about for a number of years.

In fact, I recommended buying shares of copper miner Teck Resources (TECK) in my former newsletter Empire Stock Investor in the September 2021 monthly issue, back at my old firm Empire Financial Research.

Since that issue, Teck is up 111% versus 23% for the S&P 500 thanks to soaring copper prices.

Turning back to Nic's presentation, he started by showing copper prices over the past five years and why the metal is superior to gold and silver:

The world's largest copper-producing countries are Chile, Peru, Congo, and China, with everyone else far behind – here's the slide Nic shared:

And this slide shows the world's 10 largest copper-producing companies:

Demand for copper is high and rising thanks to its use in electricity networks (I discussed the surge in demand for electricity in yesterday's e-mail), renewable energy, and electric vehicles (in the top row of each column in the chart below from Nic's presentation, "Cu" stands for copper):

Nic also showed a series of slides making a compelling case that demand for copper is likely to more than double over the next 25 years, while supply will actually decline. Here's my favorite among them:

In summary, Nic sees a big surge in the price of copper, exploration investments, and mergers and acquisitions in the sector.

He concluded by naming four of his favorite stocks:

Now, keep in mind that I'm not familiar with these companies... so I'm not making a recommendation on them.

My colleagues here at Stansberry Research, however, have also been bullish on copper – and Teck as well. In fact, in the February 2023 issue of our Commodity Supercycles newsletter, they also recommended buying the stock. Subscribers who followed the advice to buy are up 15% since then.

Meanwhile, as I also mentioned in yesterday's e-mail, my team and I at Commodity Supercycles have identified our favorite ways to take advantage of a boom that we see in energy demand. You can learn more right here.

And lastly, I'd like to thank Nic for permission to share his presentation with my readers. You can see the entire 44-slide presentation here.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.