Source: Malcolm Shaw 03/15/2024

In the realm of investments, uncertainties often parallel opportunities, and seasoned investors know that taking risks when the tide is high can lead to golden outcomes. Malcolm Shaw, a knowledgeable figure from Hydra Capital Partners, has shared his strategic insights on promising investment opportunities in the metals and energy markets. Shaw bears open the chest of his investment treasure, unveiling stocks he owns and monitors to inspire due diligence maneuvers in the commodity cocoon.

March has seen the gold sector take center stage, with prices soaring to celestial heights. This glittering uptrend, however, is viewed with skepticism by some investors who have felt the burn of false flashes in the past. Yet, amidst this cautious realm, as central banks hoard gold and the U.S. dollar wanes, the precious metal stands under the brightest limelight of all.

Gold’s recent breakthrough past the formidable $2,080 barricade has startled many onlookers. The majority, unaccustomed to the sector’s nuances, gawk in astonishment at the unfamiliar tickers and valuations dancing before them.

The lack of widespread engagement suggests that the golden parade might have ample grounds to prance further, shedding disbelief like a snake sheds its skin, akin to the energy sector’s phoenix-like revival in the bygone era of 2020 and early 2021.

Despite the euphoric climb, numerous gold stocks glimmer at historically enticing valuations when analyzed through the lens of price-to-net asset value (P/NAV) metrics, free cash flow yields, and cash flow multiples.

Even goliaths like Newmont Corp. continue to linger close to their half-decade lows without a touch of bubble froth. These sturdy metrics, coupled with gold’s skyward trajectory, whisper that the sector could be gearing up for a robust, enduring rally.

While gold pirouettes in the limelight, other commodities twirl in their own disco ball glow. Silver follows gold’s lead, with some “silver bugs” daring to forecast that the white metal might just surpass its radiant counterpart.

Copper, a key dancer in the energy ballet, has pirouetted past the critical $4.00/pound threshold. A weakening U.S. dollar and robust supply-demand dynamics nod favorably at the crimson metal. Zinc shadows copper, tracing its steps with precision.

Oil and natural gas shares linger at bargain prices amidst the bustling market landscape, while uranium’s structural supply-demand narrative sings an optimistic tune.

Lithium, however, falters like a wilting flower, possibly courting tax-loss selling later this year, and Nickel grapples with the shadow of fresh Indonesian supply.

In the wilderness of commodities, simplicity reigns supreme as a seasoned investor’s trusted companion. Peering at the long-term tapestry of the TSX Venture index reveals tantalizing future vistas if the stars align for a synchronized ascent in commodities. Should the current tempo hold steady for some more heartbeats, the Venture index might witness a “golden cross,” marking a technical milestone that heralds a significant march forward in the commodities sphere.

While optimism grazes my spirit, the mere act of penning these reflections hints at a potential need for the market’s pulse to harmonize before marching onwards. History whispers that before this fresh breeze, commodity equities wheezed through an arid stretch of underperformance. Nevertheless, the present terrain hints at the potential endurance of a full-fledged commodity rally.

Tenaz Energy Corp. ATUUF:

Within the domain of energy, Tenaz is a beloved star in the constellation. Anchored by a methodical M&A blueprint and a battle-scarred management crew, Tenaz Energy stands sturdy, poised to seize the day in a milieu where heavyweight energy firms seek to streamline their portfolios, entrusting non-core assets to adept hands.

Endowed with a modest share count and a market cap shy of $100 million, Tenaz finds ample breathing room for expansion while weaving its strategic tapestry. With a steadfast eye on M&A, Tenaz’s growth reads like an oracle’s prophecy. Furthermore, Tenaz twirls amidst the stars as one of the most affordable energy stocks, trading at a modest enterprise value to annual cash flow (EV/CF) ratio (hovering around 1.5x, compared to industry peers at 2.5-4x). I dare say that the company embodies one of the most promising risk-reward sagas I’ve witnessed. The stellar leadership sets sail towards hoisting the company to its production pinnacle of 50,000-100,000 barrels of oil equivalent per day, navigating the realm of acquisitions with caution and foresight. In a realm short of patience, I believe those who nurture patience alongside Tenaz will reap the rewards magnificently in due time.

TAG Oil Ltd. TAOIF:

Tag Oil’s excavation odyssey in Egypt, aimed at the Abu Roash F formation, kindles a fiery enthusiasm among niche investors. However, delays in drilling have cast a shadow over the stock, nudging the market to await the verdict from its inaugural horizontal well tests. It’s intriguing to note that the Abu Roash F formation mirrors the oil-rich source rocks of the thriving Eagle Ford play in the southern U.S.

With a potential trove of 60-80+ treasure troves in its Badr concession territory, Tag Oil braces for substantial expansion in the forthcoming epochs if the pending well assessment unveils commercial blessings. Any yield above 1,000 barrels of oil daily at the inception should be glimpsed as a triumph. Eagerly awaiting the flow test results