We?ve been talking about commodities so often in Smart Investing Daily that we?ve overlooked a key investment sector: commodity-based companies.
Smart Investing Daily reader J.D. reminds us there?s more out there than just the hard stuff, and just the yellow stuff:
Thanks for reports, enjoying reading them. Only thing I have noticed on last couple of reports as I am a newbie, when you talk commodities it seems to be coffee, gold and oil, which is good, how about discussing the minerals like companies FMG, SDL, RIO, BHP etc., and give opinions where they are heading, as all have had drops of late.
The companies J.D. mentions, Fortescue Metals Group (ASX:FMG), Rio Tinto Plc (NYSE:RIO), and BHP Billiton (NYSE:BHP), have major operations in Australia, so answering the question becomes a two-fold process.
[Sundance Resources Ltd (ASX:SDL) has operation in West Africa, and we'll discuss it separately from the rest due to its size, scope and geographic operations.]
As far as Sundance Resources (ASX:SDL) goes, I think it?s more of a risk. It is still in the development stage, as it is still confirming reserves, and expects operations to start some time in 2012.
It has negative operating cash flow and negative free cash flow, which is not uncommon in a company that?s not producing yet. The stock has gone up some 250% in the last year, which I understand is tempting.
Any stake in this company should be made as though you were putting your cash on snake eyes at the craps table. If it pays off, it?ll pay off big, but it?s a big risk, and not for those who can?t afford to lose.
