Annual Review — Commodities Stocks and Related Picks

Continuing the annual update of opinion on past "idea of the month" picks.

By Travis Johnson, Stock Gumshoe, February 9, 2012

Some of the stocks I’ve already covered in our annual review so far this year have been commodity related — Pembina Pipeline, for example, or Dorchester minerals or Seadrill, picks that also have high dividends or that trade largely as income investments. But I’ve suggested quite a few other commodity-related investments over the years, so now we’ll take a look at the rest of those that are still on our list.

These companies are not all in the same business, of course — we’ve got everything from mining financiers to oil producers, and a few stocks that are, at least in part, in the oil & gas services industry. So these are the companies we’ll look at today as we reconsider opinions about older ideas. Do keep in mind that any buy or even hold suggestion for most of these names will often rely on the underlying commodity remaining relatively stable or going up in value — if oil drops by 50% again, for example, the oil and oil services stocks will all get clobbered even if their immediate business prospects don’t necessarily change.

Oil and Gas companies and Oil services: Newalta, Golar LNG, Canyon Services Group, Petrolia, Epsilon Energy, Veraz Petroleum, Husky Energy

Other commodities-related naems: Sandstorm Metals & Energy, Sprott Resource Lending, Sprott Resource Corp., Industrea

Sprott Resource Lending (SILU) — Buy

Now yielding 4%, and I would be surprised if the dividend hasn’t doubled a year from now. This is a lender to natural resources companies, cheaper now than when I covered them originally and a bit cheaper than my personal cost basis. I love the management and think they’ve done a good job monetizing their legacy real estate portfolio and bringing on new funding deals with miners and energy companies. They were hurt a bit by the fact that it’s taking longer than planned to get rid of their legacy assets (distressed real estate), and by the swoon of junior miners, but seem to me to be moving full steam ahead, with a resource loan portfolio of probably well over $120 million by the close of the last calendar year. The books can move quite a bit between quarters since they’re in a very active transition still, but right now they trade for a slight discount to book value (3rd quarter book value, at least), yield 4%, are growing, and have great industry ...

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