There's a lot of talk about inflation in the works after the
latest round of "quantitative easing" by the Federal Reserve.
Printing $600 billion in cash is likely going to devalue the dollar
and drive up inflationary pressure. But if you think that means you
can just buy into commodity stocks - that is oil, gold, steel and
ag companies - you're mistaken. The bottom line is that inflation
will only help the bottom line of a select group of companies.
Others will suffer from higher costs, lower margins or just plain
old poor management.
To help you maximize your inflation investments, here are nine
metal and mining stocks you should avoid. Despite inflationary
pressure on commodity prices, these miners have dug themselves too
deep a hole to be good investments in 2011.
Based in Korea,
) is an integrated steel producer that produced approximately 31.7
million tons of crude steel in 2009. 2010 has been a
forgettable year for PKX, as the stock is down 23.5% year to
date. More recently, this mining stock has dropped 12% since
Oct. 1. Posco also had some distressing numbers in its last
income statement, as the company reported a quarterly revenue
growth of 14.8%, year-over-year. Priced at $100.34, PKX stock
is down over $40 from its 52-week high.
Companhia Siderurgica Nacional (
Campanhia Siderurgica Nacional
) is an integrated steel producer operating in Brazil and Latin
America. Its three operating segments are steel, mining and
logistics. Since mid-April, this stock has fallen 17.6%, and
SID is down 4.6% over the past 12 months. Recently, Zacks
Investment Research downgraded SID stock to "underperforming" from
neutral. In its last earnings report, SID announced that it
missed earnings estimate by 31%. Currently trading at $16.90,
SID is definitely a mining stock to avoid right now.
Based in Pittsburgh,
) produces and manages primary aluminum, fabricated aluminum and
alumina combined. Year-to-date Alcoa has lost 17.4% of its
stock price. The bad news continues as AA reported that
earnings dropped 20.8% year-over-year, in its last financial
statement. Additionally, BMO Capital Markets recently
downgraded its position in AA based on the demand for aluminum in
American and foreign markets. Alcoa stock may only cost $13.36, but
it should still be sold at this time.
Sterlite Industries (
) is a non-ferrous metals and mining company that operates
extensively in the United Arab Emirates. Since January, this
stock has dropped -14%, compared to gains by the broader
markets. Another unsavory statistic coming from SLT's last
income statement is its quarterly revenue, which was reported as
dropping 0.4% from the year-earlier period. While the stock
may have rebounded slightly since September, SLT dropped nearly 4%
last week alone.
Kinross Gold (
Headquartered in Toronto,
) is involved with the exploration and acquisition of gold-bearing
properties, as well as a wide variety of other mining activities.
2010 has been an up-and-down year for KGC, and overall the stock is
down 2.5% year-to-date. Since Oct. 1, the stock has lost
4.5%. On the earnings front, analysts have scaled back
slightly on their estimates for next quarter at 15 cents, after the
company posted an actual EPS of 16 cents last quarter.
Aluminum Corp. of China (ACH)
As its name suggests,
Aluminum Corp. of China
) is an aluminum company with operations bauxite mining, alumina
refining, primary aluminum smelting and aluminum fabrication.
Year-to-date, ACH stock has slid 15.7%, compared to small gains by
the broader markets. More recently, the mining stock is down
3.5% since the beginning of October. Trading at $22.95, ACH
is down from its 52-week high of $34.27.
Nucor Corp. (NUE)
) manufactures steel and steel products, and rounds out the list of
top mining stocks to sell. Since January, NUE stock is down
18.4%. The stock has leveled off lately, but is still
underperforming. Since Oct. 1, NUE is down 0.4%. Last
quarter, Nucor also missed its earnings estimates by 36.4%.
Trading at $38.07, Nucor is less than $3 above its 52-week low of
$35.71. Sell this mining stock now.
As of this writing, Louis Navellier did not own a position in
any of the stocks named here.