This investor is drawn to commodity stocks like Suncor
Zoltan Ban has shares in Suncor and other oil stocks. (MARK RALSTON/AFP/Getty Images)
Author and writer
Includes shares in Suncor Energy Inc., Chevron Corp., Barrick Gold Corp. and Ur-Energy Inc.
Zoltan Ban is the author of Sustainable Trade, a book on sustainable economic development. He also has a degree in economics and writes for investing website seekingalpha.com.
How he invests
“I tend to invest predominantly in things I understand,” Mr. Ban says. Having studied commodity markets extensively, this means a focus on resource companies.
Oil producers are of special interest. He began buying their shares near the end of 2015, when crude oil was trading at $40 (U.S.) a barrel – after collapsing 60 per cent over the previous 18 months.
Mr. Ban’s demand and supply analysis had concluded that oil was due for a rebound because the market price was below the “longer term break-even price for firms involved in extraction.” In short, low prices would push high-cost producers to trim production, resulting in tighter supplies in the marketplace.
The price of oil continued to slide after he bought. But he was sure of his thesis and kept buying. When oil prices turned up in early 2016, his stocks rallied and became profitable.
He is still holding his stocks on the expectation oil prices will go higher yet. Supply is still constrained, as the oil recovery remains modest so far. Plus, demand should trend upward as the global economy continues to expand.
Suncor is a favourite. It is growing production even though oil prices are still relatively low, “which sets it apart from stagnating oil majors such as Shell and Chevron.”
“Barrick Gold happens to be my best investment so far,” Mr. Ban notes. “I bought its stock in November, 2015, and it is up more than 100 per cent” in an environment of heightened geo-political risks.
He took an 85-per-cent loss over a decade ago on his first investment, Uranium One Inc. The lesson learned was that he needed to educate himself more in order to do a better job evaluating the fundamentals.
One not only needs to self-educate but must also have the patience “to wait for the fundamentals to play out,” Mr. Ban advises. “They rarely play out as expected.”
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