Funds which are short of the miners are likely to continues to show lesser returns as the sector continues to outperform in terms of cash generation and strong earnings”
Not sure that following what otheres say or do is a sustainable path to wealth creation.
Firstly, a vast body of precedent shows that the time to buy deeply cyclical sectors, such as resources, is when the sector is unloved and commodity prices are low (That time was probably around 2 years ago).
And not when “many are saying” buy miners, like now.
Secondly, given the choice of buying shares in either:
A) a relatively low-risk, defensive business which generates sustainably high rates of return, and with demonstrated low volatility in financial performance and cash flows, as well as being managed by executives that allocate the capital of the business prudently and judisciously (such as AMCOR),
Or
B) a high-risk, capital-intensive industry in which the corporate participants have finite asset lives, no pricing power, and volatile financial peformance; and whose executives have an inordinately poor track record of making capital investmemt decisions which mostly end up destroying shareholder value (i.e., the resources sector)....
... I find that a very easy decision to make.
Finally, as for your choice of “growth” company, namely OMH:
Personally, I think that being a part-owner of a series of capital-intensive smelters, with their inherently high-cost structures, is something that is of very little interest to me, even under the best of circumstances. But when those assets are located in some parts of the globe where counterparty, and sovereign, risks are high, then my interest levels promptly tend to zero.
Good luck to you, though.
AMC Price at posting:
$14.03 Sentiment: None Disclosure: Held
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