Hi David/Eoin, I was wondering how I could view both your longer term investments. (it used to be My Top 10) I have recently bought a year’s subscription as I used to be a subscriber but stopped due to my move to the US. I have listened attentively and have enjoyed the audios. The mining sector currently looks oversold and I am looking at the Blackrock mining fund, it is very close to the 2008 low. I am intrigued to hear your view for the longer term as it looks like a great buying opportunity. As always thank you for a great service, it’s great to be back!!

David Fuller's view

Welcome back and thank you for your kind words. 

I stopped commenting on Top 10 several years ago because it was never intended to be a model portfolio (model for whom?) and it also became a distraction.  I believe we can best serve subscribers by being an additional interactive research department for you, saying what we think, commenting on lots of markets, answering your emails and providing a very large Chart Library. That said, Eoin and I list everything which we buy and sell personally, in Comment of the Day as those transactions occur.

The Mining Sector certainly is oversold and Blackrock World Mining Trust (weekly & daily) has also fallen for the last ten weeks.  It also currently trades at a discount to NAV of -11.15%, according to Bloomberg.  There are definitely some zombie miners in their portfolio and we have also seen massive liquidation, reducing market cap to £298 million.  BRWM’s top two holdings are BHP Billiton and Rio Tinto, which account for almost 25% of the portfolio at today’s valuations.  I still think Rio can hold its dividend, currently 8.83%, but BHP has already said that if necessary it would reduce its dividend, currently 13.59%, if required to protect its balance sheet. The market is currently betting on a dividend cut.

The triple whammy for miners: 1) Ramping up production in the belief that demand from China could only increase; 2) China’s slump and switch to more of a consumer led economy; 3) A huge increase in mining efficiency thanks to accelerating technological innovation.  The known consequence is massive overproduction. 

Today, mining production is finally declining and consumption from China is beginning to increase.  In this most cyclical of industries, following every bust cycle survivors have risen from the ashes like the proverbial phoenix.  I see no evidence today that the mining sector has bottomed, but it is certainly extremely oversold, and the next big move has to be upwards.   

In the interests of full disclosure, I have held BHP and Rio for many years, (too many you might think) often reinvesting the dividends on weakness. I also have a small long position in BRWM.