You're Either a Contrarian or a Victim

Editor's note: The biggest gains in natural resource investing rarely come from following the crowd. They come from buying essential commodities when prices are depressed, sentiment is negative, and the market is giving up. That's the contrarian's edge – and where natural resource expert Rick Rule believes the best long-term opportunities begin...

If you're going to invest in natural resources, you have two choices...

Be a contrarian or be a victim. There's no middle ground.

That may sound blunt, but it's a truth I've found after five decades of investing through every kind of commodities cycle.

Resources are volatile, capital-intensive, and politically charged. They attract hype when prices rise and contempt when they fall. And yet, over the long term, they are essential to human progress.

That disconnect between perception and necessity is where the real money is made – if you're willing to invest when others are fleeing.

Most investors get this wrong. They pile in when prices are high and hype is buzzing. But in commodities, by the time investors are excited, much of the opportunity is already gone.

Let me say this clearly: The best time to buy a commodity isn't when it's loved – it's when it's hated.

You want to buy when the price is below the industry's average cost of production... when companies are shutting down operations... when headlines scream that demand is dead, that a material is obsolete, or worse – "toxic."

That's when I lean in...

I've seen it too many times to count.

In the early 2000s, uranium was selling for $10 a pound. It cost $40 to produce. The industry was in liquidation. People thought nuclear was dead.

But what were the choices? Coal? That wasn't politically palatable.

Wind and solar? They were intermittent and expensive at the time.

The math was simple: Either uranium prices went up, or the lights went out. Sure enough, the price soared to $140.

We saw a version of this again not long ago...

In 2020, and for years prior, uranium was trading around $20 a pound. It cost roughly $60 per pound to restart old mines. And yet utilities needed it more than ever as the world rediscovered that baseload, non-carbon energy isn't optional.

When I saw that opportunity, I said: Whenever the price of a commodity is below the cost to produce it, it's not a question of "if" it will rise, but "when."

Uranium went on a tear... Today, it sits above $86 per pound.

This isn't a uranium story, though. It's an investing principle. The phrase I use to describe it is, "Inevitable, even if not imminent."

And if you understand the difference between those two words – inevitable and imminent – you'll understand how I approach every investment I make...

The Contrarian Formula in Commodities Investing

You don't need to get the timing perfect.

You do need to get the trend directionally correct – and be early. That's where the money is.

In fact, being early is the only way to capture the outsized gains that resource investing can deliver. I've had speculations where the worst-performing stock went up 22-fold.

But I was six years early. If you can't tolerate that lag, you're in the wrong business.

To succeed, you must have the stomach to invest when it feels most uncomfortable – when there's blood in the streets... even your own. You need to buy when companies are cutting capital expenditures, not increasing them. When management is despised, not fawned over. When the newsletter writers have all moved on to crypto.

The irony is that risk is lowest when perception of risk is highest. That's the contrarian's edge.

If a commodity is essential and current prices make production uneconomic, then supply will shrink until prices adjust. That's how markets work.

And in extractive industries, supply can't respond overnight. It takes years to permit, finance, and build a new mine or oil well. That lag creates the window for real upside.

Let me give you a mental framework. When you're evaluating a commodity, ask:

1. Is this material essential to the functioning of modern life?

2. Is it currently priced below the cost of production?

3. Is the industry in liquidation or distress?

4. Is demand likely to recover, or alternatively, is the commodity a long-term necessity?

If you can answer "yes" to all four, you're likely looking at a good contrarian opportunity.

If you can also find a company with a strong balance sheet, tier-one assets, and disciplined management that knows the difference between growth and value – then you might just have a 10-bagger on your hands.

But don't expect it to come quickly...

Commodities move in long, violent cycles. Bull markets can last a decade, but they're born in despair and die in euphoria. And most investors are wired to buy euphoria and sell despair. That's why I say: You're either a contrarian or a victim.

Now, some will say, "Rick, that's easier said than done." And they're right. It's psychologically hard. That's why it works.

Markets don't reward the crowd. They reward the disciplined, the prepared, and yes – the uncomfortable.

It helps to remember one last thing...

The cure for low prices is low prices. It always has been, and it always will be.

Industries can't run at a loss forever. Capital walks. Supply shrinks. And eventually, price responds. If you position yourself before that happens, and if you can wait it out, the rewards can be extraordinary...

But only if you're willing to buy when everyone else thinks you've lost your mind.

Regards,

Rick Rule

Editor's note: The White House is putting billions of dollars behind America's critical minerals supply chain. That new spending push could reshape a corner of the market where Rick sees a critical window of opportunity. And as this story unfolds, he believes a handful of overlooked stocks could deliver outsized gains... with upside potential of five, 10, or even 50 times.