Position Update

Position Update

 

Approximately two weeks ago we wrote a piece talking about how the commodity sector was dramatically oversold and should start looking interesting to those contrarian investors. We highlighted the favorable supply and demand characteristics of platinum in particular.

 

 

Given the market action since that note and the action within our selected positions, we are encouraged by the early signs of performance but will absolutely be willing to increase our positions if the opportunity presents itself.

 

In the note we stated favorable long bias towards four different ETF’s:

 

ETFS Physical Platinum (PPLT) at $121.45, up 0.7% since the note.

iShares Silver Trust (SLV) at $16.40, up 1.1%

SPDR Barclays International Trs Bd ETF (BWX) at $57.50, up 1.3%

CurrencyShares Euro ETF (FXE) at $124.40, up 1.1%

 

The returns and time horizon mean very little to us at this juncture. What we are very pleased about is the relative performance against most major indexes.

 

Over the same period of time the market averages have been:

 

S&P 500 -4.0%

Dow Jones Industrial Average -3.6%

Nasdaq -4.4%

 

This evidence may support our sector rotation strategy and given our thesis that the market has yet to reach its bottom, we are looking for a continuation.

More on Platinum

In our last posting on platinum, we commented that given the five year lows that were hit a few weeks ago, several mines were expected to cut back production and/or sell more inefficient mines. Events that we speculate are good for the price of platinum.

 More on cutbacks and mine sales

 Anglo Platinum to evaluate mine offers

 Platinum miner sees opportunity in supply cuts

We also mentioned the geopolitical events surrounding the price of platinum, namely a meeting that is set to take place next month in which South Africa and Russia (the world’s major producers of PGM’s) to help stabilize the price of platinum and palladium.

More on attempting to control PGM prices

Central banks “face a mess” buying gold, platinum & palladium

Platinum price push via SA/Russian PGM talks? Don’t hold your breath

So you want to control PGM prices…

The U.S. government is warning on platinum mining here

Suggested Reading

Ten companies Adrian Day sees as stable in a world that is not   

Peter Major’s outlook on the platinum price

BMO cuts gold, silver, platinum price outlook

Bottom Line: Indeed platinum prices have been under pressure of late and will very likely retest those lows. That said, we cannot ignore the favorable supply and demand dynamic surrounding this industrial precious metal and believe it will add value to a portfolio over the long term.

Joseph S. Kalinowski, CFA

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