You're Only Ever a Contrarian or a Victim in Natural Resource Investing

Episode #351 | March 4, 2024

Episode #351 | March 4, 2024

You're Only Ever a Contrarian or a Victim in Natural Resource Investing

In This Episode

On this week's Stansberry Investor Hour, Dan and Corey are joined by Rick Rule. Rick is the president and CEO of Rule Investment Media. With nearly 50 years of experience managing investments, primarily in the natural resources sector, Rick is an authority. And he joins the podcast to share his thoughts on valuation models, uranium, and four commodities that could be worth investing in.

Dan and Corey kick off the show by discussing Warren Buffett's recent letter to Berkshire Hathaway shareholders. In it, he honored his late colleague and friend Charlie Munger, plus gave updates on some of Berkshire's businesses. Dan and Corey also cover Apple switching its resources over from electric vehicles to artificial intelligence. 

Next, Rick joins the conversation. He goes into depth on models, such as the discounted cash flow model. He talks about the flaws with models, why models are only useful for apples-to-apples comparisons, and how a model can be used on exploration companies or similar companies that don't have revenues. But as Rick warns...

You need to understand the value of models... I construct them constantly and have used them to great effect. But I have never believed in their implicit accuracy. I've regarded them as guidelines.

After, Rick goes into detail on the uranium market. He describes why uranium companies have mothballed production, what makes uranium so unique in the natural resources world, the differences between the spot and term markets, and how to interpret uranium companies' financials...

It is interesting that the uranium market has a developed term market, unlike any other commodity on the planet... Most commodities around the world are sold at spot or sold in the futures market, which means that a company's revenue line is determined second by second in public markets. Increasingly in the uranium market, the spot market is irrelevant.  

Lastly, Rick calls out several commodities that present good investing opportunities today. He describes one of them as "stupidly cheap"... another he says is hated by investors and its market is in disarray... and the final two, he explains, are being sold off because of an incorrect belief that we don't need internal-combustion engines anymore. Rick even goes one step further and namedrops specific companies that could be worth looking into to take advantage of these price discounts. As he explains...

I'm building a shopping list now in anticipation of activating it when the hate is more extreme.