Make no mistake....if the S32 share price were to fall 30% from here (it's certainly
possible, but
not at all probable), as too would Glencore, Anglo American, and the world's major base metals companies. It would almost certainly be a sector-wide, massive price haircut and not South32-specific. It would mean
much lower commodity prices, and probably a global recession. Sustaining capital would fall dramatically. There would be no incentive pricing for new production. A rebound would be inevitable. Circa $2.00 is the commodity price crash of 2016, and the Covid lows of 2020. It ignores our stronger portfolio of mines in 2024, world electrification, and global population growth needs. Smart money, long term, deep value, contrarian investors would be backing up the proverbial truck (Allan Grey's current 19% holding in Ansell comes to mind...).
I'd rather be buying beaten-up S32 today, than buying FMG at $29.95 last month on $135 a tonne iron ore prices and thinking there was some type of upside value to be extracted from that trade.
I heard a contributor (his name escapes me) on
Au.s.biz's "
The C.all" last year say about mining stocks:
It's counter-intuitive, and unlike almost every other sector, but to make money you have to buy them when the P/E ratio is HIGH, not low. It means earnings have disappeared due to high overheads and low commodity prices. It's usually somewhere near the bottom of the cycle. According to
Market In.dex, our EPS is currently
-17.5c and our P/E ratio is
zero.
That said, I would not be surprised if the current exuberant market corrected before year's end, and we ended up momentarily near ~$2.50. I have a small order in for $2.77 for X number of shares -- to average-down, and round my share total up to a more aesthetically-pleasing number than I have currently
I hate having a S32 share total ending in "43". Urgghh!
Don't listen to me though. I had my chance to buy CSL, Elders, Bega, Boss Energy, Beacon Lighting and JB Hi-Fi -- all of which were on my "to buy" list, fell
well under my buy price last year, but I lacked the conviction to press that "buy" button (to my annoyance and current disappointment), thinking they would fall further. I was seduced to wait on some of these stocks by an ugly-looking chart which had been falling seemingly indefinitely. I'd been following these stocks for over 12 months too, and have had to watch the stock prices run hard since Christmas. A strong rebound can happen out of nowhere, and before you know it, you've missed the boat. Hence why I will not play the short-term game of selling S32 today, and hoping to buy it back for less at a later date. It's a fool's errand (it would have been nice to have sold at $3.56 two months ago though, in hindsight!). Go ahead and wait for $2.00 if you like, but don't complain when it's gone to $4.00 or $5.00 and you're still waiting for the perfect entry price.
As written here many times, I've been buying a parcel of S32 every month or so for the past two years. Tomorrow I qualify for my one-sixth of a cent dividend to enrich myself further with this company -- can't wait!!!! If the share price is down tomorrow, I'm blaming it on going ex-div
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