Have been adding to SHL via my SMSF and I would add BKW into your mix @Mujo which both are getting hit with the IR macro sentiment. Could be wrong but if ... they dont hike and inflation trends back down, then i think they will both re-rate

@Mujo own them all except ASX, which i think has lost its way. have been layering into the others, but could add to all, will watch how they report in August. they are middleweights for me but just added some MIN. if i could time entry into these stocks perfectly, i would add the remaining weight into what i hope would be the first of many strong results. patience is a virtue. PXA and DDR are two others i hold in a simailr vein. (domestics)

@west agree rates could cause a bit of grief short term. TLC I think is another one in that vein that I think is quality (low growth div play) but I think you can once again get a 10%pa return from current levels without too much risk. BKW is interesting especially if we end up in a housing construction boom (even though that is a negligible part of earnings really)

@Solvetheriddle If only we had a crystal ball. I was looking at MIN but the unknown remediation bill did give me cause for concern - as well as the iron ore issues. The hate for lithium at the moment gives me hope. Then again I think what makes MIN quality is Chris Ellison and if anything happened to him I would lose interest.

Thanks for the replies!

@Mujo I will add more IEL at $14 and MIN at $53. I am looking ahead 3 years for both of these businesses. It could take that long for the sentiment to change.

Good topic @Mujo

BXB is back into buy range and will be buying in next week or two

AUB - I know @Solvetheriddle is a fan. I am late to discovering the wonders of insurance brokers, particularly in the current cycle of insurance premium increases. A classic clip the ticket business. Don't own but will be re-investing significant percentage from proceeds from ALU sale. Similarly SDF as a broker is a great business, not as cheap on usual metrics but greater potential for growth as it expands into US. Clearly higher risk as a consequence.

AZJ beginning to look reasonable value, and the more I read, the more I see Australian coal having a robust future (unfortunately). A monopoly business.

TPG? certainly cheap but is it quality? Well not recently, but its ROIC/ROA have historically been pretty good. Im not sure if it will return to these metrics or not.

ASX - mentioned already, I own but won't be adding more until evidence of sustained improvement in performance......still waiting.....ahem

IEL - mentioned. have started to add but am in no hurry to reach full allocation as I can see further poor sentiment and possibly another shock or two as per @Rick

SKC I have a tiny holding in. It used to be a small holding. This is higher risk, but has been so beaten down (much like SGR), that if it doesn't fall foul of legislation/regulation and can return to BAU, would provide fantastic returns. True monopoly with historically superb metrics, if you don't mind investing in something as ethically challenging as gambling. Its difficult to judge what the probability of the various outcomes are though.

(info largely based off morningstar valuations)

Nice topic @Mujo I will add my 2c on top of all the other great contributions

IEL - I own because I think it is undervalued currently, but only a small lot because I also think there are a lot of risks on how it will play out, I expect a good outcome but there isn't a strong asymmetric upside is my view.

DMP - on my watch list, but I am in no hurry and need to do more work. The issues facing it will probably resolve in time, but I don't think any time soon.

SHL - I own but bought too early ($29). A very well-run business, leader in it's industry and long growth runway which is under-appreciated currently due to the mess of comparatives following the COVID period.

MIN - My interest in this is based on Gaurav Sodhi's views (buy below $65). I am relatively bullish on Iron Ore for the next few years and I expect Lithium to come back after a lengthy shake out in the industry. However, PLS (also liked by Gaurav below $3.50) is my preferred value play in the Lithium space and it has just gone under $3. The risk around Lithium I see is the "irrational competitor" that China represents, they are willing to run at a loss for a long time to dominate the market. So PLS which has one of the lowest cost and best quality mines is likely to be a long-term winner - but I suspect there is more pain to come and a lower share price as a result until we get there.

ASX - One of the worst run companies on the ASX... It should be a gold mine for shareholders due to it's virtual monopoly, but management has failed to deliver, and I feel there is a culture there that lacks any drive to innovate and take risk in an engaged and intelligent way!

RMD - I own and am happy to hold at the current level but wouldn't buy now. I bought in at $22.65 and intend on holding it for 12 months to get the CGT discount and also give it the time it needs for everyone to calm down about the weight loss threat.

BKW - along with SOL, it's always a solid option, but they both go through cycles in price, so you can buy at or around previous lows and sell at new highs if that's your thing, or just hold and go fishing - both will do well.

WOW - Previous comments in SM on this are worth looking at. Probably getting close to a hold at the current price, but if it dipped below $33 due to all the BS flying around politically then I would buy if I didn't already have a full allocation, I was lucky to load up at $30.50.

I don't have anything of value to add for the other stocks mentioned so will leave it at that.

It is good to look at some big names when the market is in hate mode for them - provides for some good asymmetric opportunities, not as exciting upside as small caps but also without the downside "excitement"....

@Tom73, @Mujo @Solvetheriddle @Chagsy @Rick and all keen on finding the unloved....

Not a popular sector, but energy is always topical and always cyclical.

In very general terms WDS seems to be in a similar situation to WOW.

Ie: a bit on the nose, plumbing 52 week lows etc.

Morningstar has WDS paying a 6.7% div, fully franked.

SP has bounced a little off 52 week lows

FWIW, Morningstar has applied a fair price of $39.54, so some potential upside.

STO could be an interesting one to look at a little closer from a takeover perspective

Some suggesting that the energy sector is poised for an upswing.

With recently forecast shortages

I am loving this discussion.

Thanks to you all for kicking this around.

I've recently bought some COE @Arizona - as an East coast gas play - I prefer them to STO - mostly due to management, and I think COE is a clearer play in terms of increasing demand and decreasing gas supply on our East Coast, particularly the south east, and I can't see how we can transition to renewable energy without gas in the near and mid term. Heading back to the opposite side of the country, I'm still in WA and have been looking at the moves that some people such as Chris Ellison have been making to pressure the WA gov into allowing more gas to be exported to make their own plans more economically viable. CE is primarily wanting to provide gas for use on his own MinRes (MIN) sites and to sell to others domestically, but it's about the scale of the processing plants that get built - the larger their processing capacity, the more sense (and dollars) it makes to build them. I have also bought back into MIN around 3% below today's close. I also now own some IDP (IEL) and I have bought and sold Lynas (LYC) for a few Ks of quick profit (2 week holding period) but LYC is still in my SMSF. Good thread!

@Bear77 Great stuff. I'll take a look at COE, thank you.

LYC, IEL and MIN are all in my sites (on my watchlists.

I am watching MIN very closely and am kicking myself that I didn't get in at recent lows (sub $55) - There's that FOMO, then the "fear of paying more than you had to" psychology kicking in.

The resources sector is certainly in the doldrums, but are we bottoming? How is demand going to look moving forward?

I realise as I am typing that I seem to be bullish on resources and energy.

Nicely played on LYC

Yeah, thanks @Arizona My thinking on LYC was that it was being shorted, had a bit of tax loss selling, was large enough, so plenty of liquidity, and a quality asset in Mt Weld with two processing plants now (Malaysia plus the new one near Kalgoorlie), so I bought it for a quick bounce in July (bought in late June) but I was also happy to hold it if I didn't get the bounce because it was very reasonably priced in June and they will get that positive rerate at some point - was my thinking. No strong feel for the quality of LYC management, so not a high conviction buy but I had a few thousand K in cash after liquidating that portfolio in June so LYC looked like a decent place to park some of that at the time.

The outlook for their (Lynas') combo of REEs (the basket they have at Mt Weld) remains very positive - the world will continue to need Rare Earth Magnets as they remain 40% more efficient than conventional mangnets so the move to electric and renewables (EVs and even Wind Turbines) require Rare Earth Elements and will continue to do so, and there is more and more pressure for companies to source those ex-China, so Lynas is very well positioned from that POV, hence I do continue to hold them in my SMSF.

Currently using a small laptop without a backlit keyboard, can hardly see the keys, so excuse the typos. I'm in a B&B farm stay property with family in the hills near Manjimup - tall timber country. Very wet today so just catching up on a few online things. Also using host's Wi-Fi which is also being used for Wi-Fi dialling for our mobile phones as there is no mobile phone coverage here either. Bit hit and miss, in terms of sending and receiving stuff electronically, but we're getting by.

Beautiful part of the world.

The "Four Aces", Donnelly River, near Manjimup, WA.

@Bear77 You are coming through load and clear.

If there were any typos, I didn't see them (not one of my strong points though, I'll admit).

That SW corner of WA is amazing, beautiful country.

The weather can really come on strong over there.

I say from personal experience - on the run from covid lock downs in a camper trailer - the winter winds and rain were impressive!

I like what you are doing there with LYC.

Holding longer term in your super makes sense to me.

Rare earths are surely needed in our electrified future.

Much to my frustration, it's going to take some time to get there.

Companies like LYC will surely just become more sort after as time goes by.

Enjoy Manjimup and thanks for the inspiration on these stocks.

I have recently left Alice Springs, NT having lived there for a long time.

It is always amazing to see trees of that size and grander

I think to use of the word "Awesome" is appropriate, in this context.

@Mujo Is it fair to say, that given where we are cyclically, miners like BHP, FMG, etc are falling into the "unloved" bucket?

Just a thought.

@Arizona definitely the last few months they’ve sold off, though they had a good run last year on the back of better than expected iron ore prices so not sure they’re cheap with the recent sell off. With those i’d generally prefer just to play and index like option like AFI to get that exposure.

I generally don’t associate miners with high quality as i have no idea what they’re going to be earning in 10 years time - albeit BHP and RIO has some of the lowest cost, long lived mines in the world. Why i mentioned MIN before as i think it’s the management there that made the quality and the ability to think outside the box. Similar to this episode on odd lots regarding timber https://podcasts.apple.com/au/podcast/odd-lots/id1056200096?i=1000518629853 and the fact there’s a market opportunity due to the way all the listed and other market participants behave.

Clearly, mining is an area that i should focus on given most australian billionaires have come from mining so my thinking has changed but i really am a complete amateur in the space.

@Arizona - good question. It comes down to your definition of "unloved" and your timeframe.

Take $BHP as an example. Looking at the last 4 years, it has been "cycling" (or rather volatile) within a broad range of $30-$50, driven largely by the iron ore price and commentary/outlook for China, and, related to that the global economy. So the current price of $44 is not really in the "unloved" category, at present.

$BHP is largely an iron ore play, and over that time the price has ranged between $80 and $220, currently around $110.

The marginal cost player for iron ore (90th percentile of global supply, according to the latest GS bulk metals update, which you can access via Commsec) is $90-$95.

So, on these grounds, I don't think you can strictly call $BHP "unloved".

I rarely invest in resources stocks, but I do when there is a compelling case based on SP and cost curve, absent company-specific considerations.

I'd probably take a position in $BHP at sub-$40 and $RIO at sub-$115, of course depending on what else is going on globally and in my portfolio.

Resources are the only stocks I "trade", but I do so only on a very conservative basis, and can go several years without holding, as it the case today.

@mikebrisy You make excellent points here and I agree with you.

I guess BHP would rarely find itself "unloved".

But maybe its headed that vague direction.

@ $40 it starts to look interesting, no doubt.

@Mujo interesting thread, the variation in what people consider quality always surprises me. when i joined SM i remember there was a similar thread and someone nominated 3DP. i almost choked on my cornflakes! now whatever happens to the share price up or down, hardly a quality stock, at that stage, imo. there you go that makes a market. we have different definitions lol

@Mujo I have come to view These miners as Trading stocks - buy low, sell high. Throughout the cycle.

Unless held in an LIC or ETF. Which I hold long term.

I too admit I am an amateur in the space.

Thanks for the podcast. I'll check it out.

Just kicking around some more notes on WDS and any parallel to WOW @Arizona because I have bought WOW and not WDS and wanted to explain why. I wanted to call out some distinctions beyond the obvious that they are in totally unrelated industries and as such have very different pressures - which I know you have considered and flag KAR as an alternative.

The key element is that I see the factors driving the market dislike of WDS as a lot longer term and fundamental, whereas WOW is short term political games but fundamentally the company and industry is solid. I also just don't think WDS is run to maximise shareholder wealth whereas WOW is (almost to it's detriment).

Lets look at the last 10 years, noting that WDS has provided $18.80 (ff) in dividends over the period, while WOW just $10.40 (ff). WDS has basically followed the oil price, and has provided a small positive return over 10 years if you include dividends with it's share price on a constant down tread since the GFC. WOW share price has generally been up before dividends with the 2014 to 2016 the only major pull back. Neither results are particularly exciting, but WOW wins in track record and consistency.

WOW is trading around or a little below it's average PE over the last 10 years, the PE for WDS is a dogs breakfast so I wont draw any parallels other than to say PE expansion or contraction hasn't been a big factor in value change over the 10 years. So why has WOW performed better than WDS:

My view is that despite both providing effectively a commodity products that are in high demand, WOW is more competitive due to a low cost (efficient) business structure and operation, whereas WDS is not the lowest cost producer of oil and gas. Both are price takers for the most part, WDS has a short time frame in which price impacts sales, but WOW is also limited in it's ability to set prices, the difference is that the market and sales reaction is medium terms (Coles - down down marketing push as an example of prices shifting sales)

Now to clarify on oil... I am not bearish on oil and if you have a bullish view on oil and gas prices, then WDS is a good investment. My issues is I wouldn't pick WDS for this investment thesis, nor would I pick STO which make WDS look good (take over factor aside)! I have gone for KAR (Karoon), which has had its share price beaten up recently due to concerns over it's GOM acquisition and the associated management incentives that lead to it. Activist investors are putting pressure on the company to become more shareholder return focused and it's cost of production is very low, so oil prices at current levels provide for high return opportunities.

The question you have to ask with KAR which is trading on a PE of 3 (yes 3)... compared to WDS which is trading on a PE of 16, is how much "BAD STUFF" has been priced in Vs upside opportunity. Noting that just looking at PE is not a reason to make any investment decision - just a graphic comparative in this case.

I don't see the asymmetric upside for WDS, but I do for KAR justifying the additional risk and for WOW with relatively low risk factored in the upside is attractive.

Cheers

@Tom73 Thanks for filling out the comparison with some hard data and facts.

My comments were flippant really.

I liked the conversation and chimed in lacking depth and explanations.

My thesis was simply that I believed they are:

A) large companies on the ASX

B) whose share prices I thought should head North a little. Both for different reasons.

My thinking was that shallow.

You rightly point out WDS and WOW are extremely different beasts. I agree.

A silly comparison on my part.

In my mind they are very different plays: WOW is very long term. WDS more a cyclical "trading" stock, if one is inclined.

I own WOW in my super and recently bought WDS in SM.

Re oil, or energy more broadly:

I struggle with this. I wish we were further down the green energy path, but we are where we are.

In the interim, fossil fuels are in demand across the globe.

From a market point of view, I am bullish Energy.

As you point out I have flagged KAR in this space.

I hold it on SM and in RL.

However, The board is a major concern.

Thanks for putting meat on the bones on this questionable comparison.

Cheers