Shares in Teck Resources (TSX:TECK.B)(NYSE:TECK) gained 8.51% as of noon on Friday in the week of trading and have gained more than 18% from their 2018 low, marked less than two weeks ago.
While TECK stock has lost on more occasions than it’s gained thus far in 2018, here’s why you might want to pay careful attention to the British Columbia miner today.
For one, there’s the fact that fears appear to be easing about a potential fallout between the U.S. and China.
The world’s two largest economies have spent much of the past year at the negotiating table, which gave some investors cause for concern should the ongoing negotiations begin to drag on the two countries’ positive working relationship.
However, much of those fears appear to be going away now.
And that’s probably going to be a welcome change for the stocks of basic materials companies, including metals and mining stocks like Teck Resources as well as fellow Canadian copper miner First Quantum Minerals (TSX:FM), whose shares were up more than 2% as of noon in the Friday session and up more than 13% for the week.
As of right now at least, the Chinese market is driving much of the demand for commodities and raw materials, as the country continues to invest heavily in infrastructure and building out metropolitan centres to house those who are emigrating from rural communities.
And among those commodities, copper is generally regarded to be one that is most closely tied to economic activity.
So, if current speculation proves to be accurate that, indeed, trade talks between the U.S. and China are progressing, that could be a positive catalyst for the Chinese market and, in turn, copper miners like Teck, First Quantum, and others.
Meanwhile, TECK stock is already trading at favourable valuations following a 15% decline off its 52-week highs reached in mid-January.
Analysts have the company trading at a consensus forward price-to-earnings ratio of just 8.2 times.
That’s well below the broader market, below the price of its larger peer Freeport-McMoRan, which trades at a forward multiple of 13.8 times, and well below the levels that TECK shares have historically traded at.
And while the current dividend yield of just 0.61% won’t do much to win the favour of dividend-oriented investors and retirees, the fact that it still trades below its book value suggests that it’s a stock well suited for value- and contrarian-style investors.
The company also owns a stake in Suncor Energy’s Fort Hills project, giving investors additional exposure to Canada’s oil sands.
Following this week’s sharp rally, the shares are now trading at “overbought” levels, according to certain technical indicators, so investors still looking to get in on the trade might want to consider “pumping the brakes” a bit before initiating a position in the company right away.
Instead, Fools may want to wait on a slight pullback before making their move, or, alternatively, if the shares were to continue on their current ascent without giving any reason for pause, a break above the stock’s 200-day moving average should be a solid indicator that the time to move on the shares has arrived.
Stay smart. Stay hungry. Stay Foolish.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Jason Phillips has no position in any of the stocks mentioned.