The Canadian mining companies have been a source of strength over the past few years. And while it’s too early to tell, I think that the mining plays can help power the TSX Index to finish the year with better gains than the S&P 500. In any case, the tech trade has been exhibiting a bit more volatility, while the mining stocks seem, at least for the most part, ready to move higher again after experiencing a rather untimely correction in the past couple of weeks. Of course, a correction could be a precursor to a more vicious downward move.
But for the most part, I think investors would be served well by staying with the top commodity miners over the long run. Specifically, I’m a fan of the precious metals miners at current levels as well as some of the uranium and oil producers, which may still be underrated relative to their longer-term potential as commodity prices look to rise alongside operating efficiencies. Of course, buying any commodity miner may make sense if you expect the price of a commodity to move higher over the short, medium, or long term.
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The case for picking best-in-breed miners over a broad mining ETF
However, instead of simply reaching for a commodity mining exchange-traded fund (ETF), I’d much rather own the top-tier miners that have proven to be a cut above the competition.
When it comes to mining, you want lower breakeven costs of operating. And, perhaps more importantly, you want the trend to be suggestive of even better operating economics over time as a firm’s management embraces new technologies and ways to keep things running smoothly, even when commodity price moves aren’t all too favourable. Simply put, not all miners are created equally, even though they may all act as boats standing to rise as commodity prices do.
In this piece, we’ll check out one stellar miner that I think is at the top of its game and is worth buying at current valuations.
Cameco
When it comes to the growth miners, it’s hard to look past uranium producer Cameco (TSX: CCO), even at today’s premium valuations. Now, I dislike paying up a fair-to-rich multiple for shares as much as I do buying after an already sizeable year-to-date move in a stock.
Still, I think it’s worth getting at least some skin in the game of shares of CCO, especially if you think AI demand will cause a more fierce surge in nuclear energy demand (I think there’s a higher chance of this going into the second half of next year). Indeed, if AI infrastructure overwhelms and there’s not as much uranium supply to go around to feed the ambitious AI models of tomorrow, Cameco and other uranium miners will benefit greatly.
What makes Cameco stand out more than rivals, though, is not only that it’s a fairly sizeable Canadian firm whose shares trade on the TSX.
Rather, it has excellent managers as well as some of the best assets in the game. Its size is an advantage, and with impressive growth numbers, I view Cameco as a far better bet than most other uranium miners, as well as the uranium-focused ETFs. You can pocket the extra cash that would have gone towards management expense ratios on ETFs. And you’re really getting leading exposure, at least in my view, to the booming field of uranium production.
