Mining Shares' Rebound Illustrates the Profitable Loneliness of the Value Investor


GLNCY data by YCharts .

This reminded me that I had written multiple positive articles on miners, including Glencore (but not Anglo American) since last August. My view -- in keeping with my approach to investing -- was that of a value investor: Investors, traumatized by the severity of the bear market in commodities, were having trouble seeing past it. In overweighting negative scenarios for mining companies, the market was creating a disconnect between price and intrinsic value.

Or as one investment banker told Financial Times (emphasis mine):

[The recent price run-up] is deeply scary for the shorts. The fear of insolvency, which was never a reality, has now receded in Anglo and Glencore and institutions aren't selling. This could be an almighty problem.

In the spirit of accountability, the following table summarizes the price performance of the stocks that I highlighted from the article publication date through last Friday (it does not, therefore, include today's outperformance):

Date/Stock Return (to March 4, 2016) Outperformance (Underperformance) Relative to the S&P 500
Aug. 20, 2015Glencore (12.7%) (10.9%)
Aug. 28, 2015Freeport-McMoRan (7.2%) (7.8%)
Sep. 18, 2015Freeport-McMoRanGlencore (10.5%)+13.3% (12.6%)+11.3%
Sep. 24, 2015BHP Billiton (14.3%) (17.8%)
Sep. 29, 2015Glencore +80.8% +74.6%
Oct. 4, 2015Glencore +29.8% +29.2%
Dec. 8, 2015Alcoa +12.3% +15.4%
Jan. 15, 2015BHP Billiton +37.1 +30.7%
Equal-Weight Average +14.3% +12.5%

Data source: Bloomberg.

The numbers look encouraging at this stage, but it is worth remembering that it was not a free ride, in the sense that those numbers looked very different at the end of January -- and not in a good way. Investors in these shares would have had to suffer through gut-wrenching volatility to achieve the results above (which could reverse in the short term, too).

Note also that I was early with my calls, which is a cross that value investors must bear. However, the conviction to renew the calls at lower prices has made the difference between success and failure, in aggregate (so far, at least).

Finally, the mining sector is not one that enjoys particularly attractive economics. I did not have a long-term investment in mind when I mentioned these shares; rather, I thought investors would benefit from a winnowing of the gap that had opened up between price and intrinsic value. That process appears to be well under way.

The $15,978 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how you can take advantage of these strategies.

The article Mining Shares' Rebound Illustrates the Profitable Loneliness of the Value Investor originally appeared on

Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More