29 April 2019
Where are we in the Cycle?
Of the five PortfolioDirect cyclical guideposts, two are ‘red’ and three
‘amber’. The cyclical positioning has been classified as ‘downswing’ with
global growth decelerating, a loss of output momentum in China, the largest
national user of metal, and less supportive monetary policy settings than
have prevailed for most of the post-2009 period.
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Market Directions
Rising headline equity price indices were at odds with weaker mining
equities by the end of the week. Metal prices - and the related equities -
remain caught in a tug of war between slowing global economic growth and the
effects on expectations of central bank attempts to shore up activity.
Whether central banks can do enough to offset the negative growth impact on
sector investment performance is unclear given the extent of stimulus
already imparted.
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Portfolio Performance and Positioning
Losses were evident across all three development categories with
slightly heavier losses among the earlier stage categories. The portfolio
loss for the week was slightly less than for the benchmark during the week.
The portfolio remains weighted in favour of Phase I companies to take
advantage of discovery opportunities, the historically depressed state of
this part of the market and the ongoing cyclical risk which is likely to
affect most detrimentally the largest stocks in the sector. No changes were
been made to portfolio models.
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Stock Reviews and Rating Analysis
PortfolioDirect rating reports analyse the quality and risk
attributes of proposed mineral developments. Rating criteria apply to mining and oil and gas stocks at any stage of
development. PortfolioDirect uses a five point rating
scale to measure the risk adjusted quality of proposed mineral developments
or companies.
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The 'Steak or Sizzle' blog provides summary judgements on
the top performing ASX-listed resources stocks.
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