Base Metals, Industrial Metals, Platinum Are Good Value - UBS
Source: Mineweb, Dorothy Kosich (2/9/09)
". . .we believe investors should consider leverage to zinc, platinum and copper; for those with a longer time horizon we would include aluminum and nickel."
The analysts found platinum to be a good value relative to gold. "Industrial metals appear to be showing considerable value, particularly aluminum and zinc," the analysts noted. "Both metals are trading at levels which are at significant discounts to long-run pricing and approaching average industry costs."
Meanwhile, the analysts advised that precious metals "appear to be reasonably valued on supply metrics. Precious metals, particularly gold, also reflect financial fundamentals and broad-based risks, so care must be taken not to read too much into the 'over-valued' nature of gold. Nevertheless, we would point out that platinum looks to be good value relative to gold based on our methodology."
However, the analysts find the value of bulk materials to be less convincing. "On our analysis, coal appears to suggest that it is particularly valued, trading as it is, at a significant premium to historical levels and industry costs. In fact, the bulk materials in general appear to be factoring in little, if any, contraction in seaborne demand."
UBS suggests, that given apparent value characteristics, "we believe investors should consider leverage to zinc, platinum and copper; for those with a longer time horizon we would include aluminum and nickel." In their research the analysts anticipate a cost decline of 15% for most commodities this year as a result of several factors, including producer currencies and lower energy prices.