I’m always a little surprised when people ask me, “Is now a good time to invest in commodities?”
Looking at the sector, we expect that resources will continue to benefit from the growing middle class in emerging markets.
As incomes rise in developing countries, the demand for precious metals, building materials and other natural resources increases. More developed countries also rely on resources to maintain their current infrastructure. Resources will remain a viable investment opportunity for investors who seek exposure to the sector.
When it comes to managing securities in the resources sector, we maintain our disciplined, long-term investment approach. We look at a company’s marginal costs of new production and make the extra effort to examine its assets and the quality of its management team.
Due diligence is a vital component of our investment process. My team and I have performed on-the-ground research and analysis by visiting company mines. In August, we travelled to Mexico to visit a mine owned by Torex Gold Resources Inc.*, one of the top holdings in Trimark Resources Fund. I think people who visit the site will be in awe, saying, “I can’t believe the mine Torex is building.” My guess is that the response from Torex management will be, “What did you think we were going to do? Sit on cash and not put any shovels in the ground?” Torex is moving steadily down the path from being an exploration company to becoming a gold producing company.
As for energy exposure, U.S.-based Devon Energy Corp.* is held in both Trimark Resources Fund and Trimark Energy Class. I have consistently spoken about Devon in the past and, if I apply a $75 oil price, I expect the stock will be trading at a significant discount to its net asset value.
These are just a couple of examples of the quality names in our portfolios. We are constantly looking at new ideas. We have a bias against cash, so you’re probably not going to see a cash weighting above 10% in either of the Funds. In fact, we have been adding a few new names to the portfolios, as we find good buying opportunities.
Trimark Resources Fund offers investors a small-cap advantage, a more concentrated portfolio of our top ideas and additional diversification through the Fund’s energy holdings. For investors looking for more concentration in energy, Trimark Energy Class invests in energy names that extend beyond oil and gas to unconventional sources of energy.
You can hear more of my investment ideas in this BNN video.
Feel free to leave any comments or questions you may have.
*The above companies were selected for illustrative purposes only and are not intended to convey specific investment advice.
Trimark Resources Fund, Series A provided the following performance returns as at October 31, 2014: 1 year, 1.22%; 3 years, -3.75%; 5 years, 0.22%; 10 years, 6.24%.
Trimark Energy Class, Series A provided the following performance returns as at October 31, 2014: 1 year, -0.85%; 3 years, 4.23%; Since inception, -1.88%.