the year ahead - 2011

Well,
i must say that it is quite disappointing to have OVR languish in the doldrums and undervalued while watching the general market surge and other ASX plays skyrocketing. The opportunity cost is obvious but i do believe that this is what value investing is all about.

The people, at this instance, that are making the most money are those that have got onto the relevant commodity plays before the herd ever set in. These value investors had taken positions when no one else was in the firms. This was based on their macro outlook and then looking for companies within that sector that exhibit good and prudent financial management as well as in possession of economically significant deposits. The big money has always been made in this manner in the commodity arena.

Indeed, one has to realise that the sector is cyclical and that within each and every quarter or year, some commodities will flatten and others will rocket. It is pretty obvious that the Chinese Dragon and the Indian Tiger is not taking a step back and is looking to push into the resource sector with gusto. What many analysts have not deduced is the strength of their relevant economies as well as their need to supply more than 2.5 billion people! China will have its corrections in its recent surge [as did the US and UK have their major corrections during their ascend into world supremacy].

The changing of the guard has begun and we will all need to be aware of this. The sooner we let this soak in...the better our investment decisions will be, in my opinion. There are major infrastructure projects warranted in these nations as well as a need to build their decaying energy sectors. With this, we will have coal, iron ore and oil be strong sectors to invest next year. Gold and silver will provide the hedge against any instability in the financial sectors of the western region and as such we should see this sector improve much further.

In my opinion, if one understands that the commodity market is cyclical in nature, it is easy to deduce that it will just be a matter of time when zinc and lead play catch up. Zinc is needed for the galvanising of steel and there will be supply shortages in 2012/12 with the closing of major mines. It will just take one piece of news to spark this flurry into the sector [just as it was with gold, iron ore, silver, rare earths and coal]. With all the deals in met coal and iron ore [which are the major components for steel making], we should hope to see the Asians lock in zinc supplies for their production. We are in that lag zone at the moment but this will change.

My believe is that the investors that have positioned themselves prior to this event...these individuals will stand to profit the most. Once zinc becomes the prettiest girl of the prom, investors will herd into the best zinc plays with projects in mining friendly jurisdictions. With its tight share register, it will move up quickly. I believe that our time will come in 2011/12....

Hopefully, i will still have my hair then..

Disc: Bought a handful of shares in the last couple of days to add to my sub holdings.