Disclosure: The following represents my opinions only. I am long AOT, BIG, CDR, DMX, FM, FOM, K, KNT, LBC, MMA, PEAK, POET, SEI, SURG, TAO, TLG, TNZ, VLE, and VZLA (image credit to Tadas Mikuckis on Unsplash)
As time goes by, we all accumulate a catalog of songs that we like. Those songs that you either can’t hear enough of today, or couldn’t hear enough of at some point in the past. I don’t think stocks are all that different. What an investor decides to put in their market playlist will be driven by many of the same things that draw people to one song or another. Different songs just sound better in certain kinds of weather or seasons. The ones where you really know the lyrics will likely never be forgotten with a little coaxing. You will know those songs. Just like you get to know stocks over time.
And, just like music, stocks fall into different categories and sectors. Rock, R&B, Classical, Punk, Electronic, and Country are to music what Energy, Financials, Materials, Consumer Discretionary, Utilities, and Industrials are to stocks. Some people specialize in one, some people dabble a little in all of them, but at the end of the day everyone will get to know the sector or two that they take an interest in… and that’s where they’ll spend most of their time and energy.
For me, that’s always been Energy and Materials. I dabble in almost everything, but for this summer, I’m feeling good about the market prospects for resources as a whole. That’s partly based on the broad acceptance that I’m starting to see from big banks in metals like copper and gold. People still like uranium and the theme is strong there. Energy is cool again to value investors who can’t resist the free cash flow yields, dividends, and continual buybacks. Silver folks are happy. Generally speaking, resources feel as cool to the market as they have in a while. Couple that with the fact that the TSX Venture index has now made the golden cross that I had hoped for back in March and the stage may be set for a real resource bull market in the not-too-distant future. It always feels good when someone likes the same songs that you do, so when it feels like the market is really coming around to resources, it puts a little spring in the step of a guy like me.