When everyone else is gorging themselves in natural resources (like they were last month), you should be looking for opportunities to trim down and take some money off the table.
But when they suddenly purge their portfolios and run for the hills — like they did just this week … heck … that’s when it’s time to start biting on some juicy bargains.
And right now, after the recent sell-off, you have a grand buffet of choice morsels to choose from, especially in Asia.
I’m not going to tell you what to buy or how much. That’s what I do in my Real Wealth Report. But what I can do for you here is deliver a handy menu. Then, it’s up to you to pick and choose.
Your Menu of Hot Asian
Natural Resource Prospects
From my personal experiences in Asia, I’ve hand-picked 13 natural resource and energy prospects that I think are ready to reap significant gains from the continuing economic boom in Asia.
Prospect #1: China Petroleum & Chemical, commonly called Sinopec, is Asia’s largest refiner by capacity.
Sinopec covers the bases when it comes to quenching China’s thirst for oil. It finds, develops and refines crude oil. It markets and distributes refined petroleum products. It sells petrochemical products. And it operates 16 oil and gas producing fields in China.
The company is huge. And its shares have risen more than 400% since the beginning of 2002. But even with the phenomenal gains, Sinopec is still a high-value, low-risk way to play the oil consumption boom in China.
Prospect #2: CNOOC Ltd. has come to be known as “The Napoleon of China’s Oil Patch” because of its aggressive expansion through acquisitions. This is the company that made headlines in 2005 with its bid to take over Unocal.
Last year, CNOOC paid $4.2 billion for Canada-based PetroKazakhstan. The deal added 550 million barrels to CNOOC’s oil reserves.
Then, it announced that commercial production began at its new field offshore in the oil-rich Bohai Bay southeast of Beijing. CNOOC’s initial production from four wells there is 2,200 barrels a day, but the company aims to get 9,600 barrels a day from 22 wells.
CNOOC’s stock has been as strong as Sinopec’s. In five years, the shares went from around $13 at the beginning of 2001 to more than $72 in recent trading. Nonetheless, I think CNOOC has plenty of fuel to continue its long ride to the moon.
Prospect #3: PetroChina Co. Ltd, even more so than Sinopec, is practically the synonym for anything related to petroleum in China — finding it, producing it, transporting it, refining it, selling it, and making and selling chemical products from it. The oil and gas giant was born out of the restructuring of China National Petroleum Corporation and grew to be a dominant force in the Asian oil market.
PetroChina’s shares have posted astounding gains. But soon they’ll have pulled back enough to allow you to get on board at the right price. From there, I wouldn’t be surprised to see a double within a year.
Prospect #4: Australia-based Santos Limited focuses on exploring, developing, producing, transporting, and marketing hydrocarbon resources.
The company produces gas, ethane, and oil and gas liquids from Central Australia’s Cooper/Eromanga Basins oil and gas fields. Santos’ reported proven and probable reserves are over 640 million barrels of oil equivalent.
The better news is that Santos recently won an exploration permit for a block in the Timor Sea. The area is adjacent to the recent Caldita gas discovery, and includes the previously discovered Lynedoch gas resource. The exploration acreage boosts Santos’ potential as a liquid natural gas (LNG) producer. Santos owns the permit in a joint venture (40%) with an affiliate of ConocoPhillips (60% and operator).
This company is on a roll. Consider it seriously, on dips.
Prospect #5: Sinopec Shanghai Petrochemical Company makes more than 60 products out of hydrocarbons, including refined oil products, petrochemicals, plastics and resins, and synthetic fibers.
Located at Jinshanwei in the Jinshan District of Shanghai, SPC operates 72 sets of production plants sprawling over 9.4 square kilometers. The company was one of the communist Chinese regime’s first ventures into a quasi-capitalist shareholding experiment.
Prospect #6: Australia-based Alumina Limited owns 40% of Alcoa World Alumina & Chemicals (AWAC), the world’s largest alumina business. Alcoa owns the other 60% and manages the project.
The company has also acquired a 54% interest in the Alumar alumina refinery in São Luis, Brazil, and established a bauxite mine in Jurutí. The Alumar plant is likely one of the lowest-cost aluminum refineries in the world, and Juruti is one of the world’s largest high-quality bauxite deposits.
Alumina’s shares have been on a sensible uptrend for a few years now.
I think that trend looks very sustainable because of China and India’s insatiable demand for aluminum.
Prospect #7: Aluminum Corp. of China Ltd. Going by the nickname Chalco, this company produces aluminum oxide and primary aluminum in China, and also markets some carbon products.
Recently, Chalco produced nearly seven million tons of alumina products. The company’s plants also cranked out some 770,000 tons of primary aluminum. And early last year, Chalco added more capacity by acquiring a 28% interest in Lanzhou Aluminum.
Like many of my other China picks, Chalco’s shares are up significantly over the past few years. But I think they have much further to go.
Prospect #8: South Korea’s Posco is an astonishing rags-to-riches story. Today, Posco is the world’s fifth largest steelmaker, producing 28 million tons of steel products a year.
Three-fourths of Posco’s production is used domestically, although a lot of it likely goes into products that are ultimately exported.
Part of Posco’s success is savvy use of automation at its steelworks in Pohang and Gwangyang. This helps explain why it’s one of the world’s most profitable steelmakers while still being very cost competitive.
The long-term uptrend for Posco shows little danger of coming unraveled.
Prospect #9: Amcor Ltd. is all about packaging — from bags to boxes to bottles. The company makes and markets corrugated boxes, cartons, aluminum and steel cans, flexible plastic packaging, plastic bottles and jars, etc.
Although it’s based in Victoria, Australia, Amcor operates 240 manufacturing plants in 39 countries. The company does about $8 billion in annual sales.
Prospect #10: Japan’s Kubota Corp. manufactures farm equipment, engines, pipe and fluid systems engineering, industrial castings, environmental control plants, and housing materials and equipment.
Kubota is no Johnny-come-lately. It was born in 1890, during the height of the Industrial Revolution … incorporated in 1930 … listed on the Tokyo and Osaka stock exchanges in 1949 … and the New York Stock Exchange in 1976.
Since the middle of 1998, Kubota’s shares have gone virtually straight up — no notable corrections. But given the company’s low debt and solid profit margin, the shares are still very attractively priced. And I see no reason why the steady bullish trend won’t continue, especially in light of booming Asian demand for construction and agriculture.
Prospect #11: Korea Electric Power Corp. dominates South Korea’s power grid. The company and its generating subsidiaries own about 90% of the total electricity generating capacity in the country, not counting plants that produce power mainly for private or emergency use.
Korea Electric Power supplies about 342 billion kilowatt-hours of electricity, about 40% of which is generated by nuclear and hydroelectric facilities.
Prospect #12: Headquartered in Beijing, Huaneng Power International supplies power to 13 of China’s provinces, as well as the municipalities of Shanghai and Chongging.
Huaneng owns 16 power plants outright … controlling interests in 10 more … and minority ownership in four operating power companies.
Bottom line: Huaneng is one of the largest independent power producers in China.
Prospect #13: It’s not easy to describe what Mitsui & Co. does because the Japanese conglomerate has its finger in so many pies. In the simplest terms, Mitsui could be called a general trading company.
The company has its tentacles in metal products and minerals, machinery, electronics and information, chemicals, energy, consumer products and services, logistics, financial markets and natural resources.
Best wishes,
Larry
P.S. Many of these stocks are about to be huge buys according to my systems. If you subscribe to Real Wealth Report, you’ll automatically get my signals. But it you’re not on board, I suggest you join now. You’re talking about just 27 cents a day.
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MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Colleen Collins, Amber Dakar, Ekaterina Evseeva, Monica Lewman-Garcia, Wendy Montes de Oca, Jennifer Moran, Red Morgan, and Julie Trudeau.
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