12/24/2008 12:01 am EST
Lawrence Roulston, editor of Resource Opportunities, is looking for commodities to rebound.
Stock markets around the world are down around 50%. Resource stocks are down even more, with many of the juniors trading at less than 10% of their values earlier this year.
For anybody with some cash, this could be the best investment opportunity in years. It could be some time yet before there is a full economic recovery. However, long before the recovery is well recognized, commodity prices will have rebounded, and the prices of many of the better companies in the sector will be substantially higher than the grossly oversold levels at present.
Make no mistake: Some of the companies that appear to be selling at bargain prices today will be selling at even better prices over the coming months. But the high-quality companies—those with cash in the bank, strong management, and good assets—will begin to rebound as soon as there is some sense of certainty in the markets.
In looking at commodities companies, there are two major objectives. One is to take advantage of the extremely oversold situation in many of the small companies. Those severely depressed valuations are the result of forced liquidations which led to panic selling. In this market there are few or no buyers for some of those companies. The values at which some of these companies are trading are far below any tangible or objective valuations.
But the overriding objective at all times should be to invest in companies that have good assets and strong management teams. Furthermore, management should be creating shareholder value—working to increase the values of their companies and not just waiting for moves in the markets or commodity prices.