Weakness persists in most metals — and commodities in general — as investors continue to worry about the heightened risk of another recession. Despite the bad news, however, there are some promising areas of strength, observes Clif Droke, editor of Cabot SX Gold & Metals Advisor.
We are recommending a new position in Alliance Resource Partners (ARLP); the company is a producer of metallurgical coal (for the steelmaking industry) and thermal coal (for electrical utilities), with approximately 2 billion tons of coal reserves in several U.S. midwestern and southern states.
Alliance is currently the second-largest coal producer in the eastern U.S. with additional mineral and royalty interests in the highly productive Permian, Anadarko and Williston basins. (The company markets its mineral interests for lease to operators in those regions and generates royalty income from the leasing and development of those mineral interests.)
Additionally, Alliance provides terminal services for the transloading of coal, and develops and markets industrial and mining technology products and services.
On the financial front, analysts foresee 55-ish percent revenue growth and 170-ish percent EPS growth in the next two quarters. Traders can purchase a conservative position in ARLP using a level slightly under $17.10 as the initial stop-loss on a closing basis.
Then there’s everyone’s favorite alternate energy metal, lithium. The battery metal has been the hands-down top performer of the past year and is currently just under a record high (as measured by lithium carbonate prices).
To be exact, lithium is up a mind-blowing 450% over the past year. As it turns out, lithium is used in nearly every weapon system employed by the U.S. Department of Defense, and especially in portable field equipment, with the wartime environment providing an extra boost to the metal’s strength.
The Global X Lithium & Battery Tech ETF (LIT), my favorite lithium tracker, has perked up and is showing relative strength for the first time this year.
LIT invests in companies throughout the lithium cycle, including mining, refinement and battery production, cutting across traditional sector and geographic definitions. Traders recently purchased a conservative position in LIT here using a level slightly under $69.70 as the initial stop-loss on a closing basis.
