Annual Review Part 3: Commodities and Real Estate (mostly)

By Travis Johnson, Stock Gumshoe, January 25, 2019

I’m going to get to several updates on Real Money Portfolio stocks at the end, including those questions “What to do with Qualcomm (QCOM)?” … but first, I’m going to go through the stocks where I’ve completed my Annual Review this week. Each year I promise to re-analyze and reconsider my opinion about each stock at least once during the year, and I collect all those thoughts in January in an effort to be as disciplined as I can and share my opinions with you as best I can. Today I’m mostly going to cover some yield-focused investments in real estate and some commodities and precious metals investments… so I guess you can say this is “Hard Asset” week…

Altius Minerals (ALS.TO, ATUSF) — buy below US$9.70 for diversified long-life commodity royalties. This has been my core “non-precious metal” commodity position for years and has been a drag on the portfolio, but I think it’s very reasonable at 8X royalty revenue, with upside from prospect generation, exits the next time commodities spike, and an eventual return to higher copper, iron ore and/or potash prices. Also look at Anglo Pacific Group (APF.L, APY.TO, AGPIF) if you want a little more growth, dividend and excitement but much more concentration risk.

I last wrote about Altius just a few weeks ago, when I added slightly to my holdings, but I’ll expand on that here. This stock is falling for good reason, China slowdown fears mean that everyone is panicked about raw materials costs falling — so copper prices are down and iron ore prices are down, which drive much of Altius’ royalty revenue… though potash prices, their other big contributor, have been steady to rising a little.

Altius continues to have some debt, about C$115 million, but also plenty of financing flexibility and some equity and debt investments beyond the royalty portfolio and project generation portfolio, so the (small) dividend looks quite safe and they should be able to make further deals if they see anything compelling (they have about $28 million in cash, and their Labrador Iron Ore Royalty investment is in equity that could be sold if they wish). I don’t know if they’ll get anything out of their Alberta coal redress claims other than a long drawn-out legal fight, but they are again getting royalties on Voisey’s Bay after settling that long legal fight, so that’s going to again be ...

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