Capital 10X Conviction Call: Copper the Catch-Up Inflation Trade
On August 7th Capital 10X published “Copper – The Catch-Up Inflation Trade”, where we identified copper as the undervalued inflation hedge relative to gold and silver.
In our report we highlighted the historic monetary expansion in the US with money supply growth (M2) rising at its most rapid rate since the monthly data series began in 1959.
This same dynamic has been playing out globally, the big three central banks (Federal Reserve, European Central Bank and Bank of Japan) have in aggregate increased their balance sheets to a record $21.3 trillion.
Paper money devaluation is a global phenomena.
Since the publication of our report we have seen copper meaningfully outperformed both gold and silver. High market volatility resulted in gold and silver selling off, however copper has risen over the same period.
Performance Since Report: Copper, Gold & Silver
Copper Miners: First Quantum & Sierra Metals Trade At the Most Attractive Valuations
On a forward price-to-sales basis (analyst consensus) Lundin Mining (TSX:LUN) and Freeport (NYSE:FCX) are the most expensive; while First Quantum (TSX:FM) and Sierra Metals (NYSE:SMTS; TSX:SMT) are trading at the most attractive valuations.
On a trailing 12 month price-to-cash flow basis First Quantum and Sierra Metals are much more attractive than Freeport and Lundin.
We continue to view the inflation as a key financial risk in the global economy, copper miners are one of the best ways to hedge against that risk.
Sierra Metals is a market awareness client of Capital 10X.
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