Fund manager says junior mining shares look cheap

Even Warren Buffett would probably consider that now is the right time to look at BHP Billiton Limited (ASX:BHP) and Rio Tinto Limited (ASX:RIO).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors who are familiar with the philosophy of value-investing gurus such as Warren Buffett will know that their preference is to buy shares when they are available at bargain prices.

This often means there will be factors such as a market-wide crash or a company-specific uncertainty at play which has produced a buying opportunity.

Right now, the crash in commodity-linked stocks such as iron ore miner Fortescue Metals Group Limited (ASX: FMG) and oil and gas producer Santos Ltd (ASX: STO) has arguably created the right environment for value investors to prosper.

Even some dyed-in-the-wool value investors who generally steer clear of the resource sector are currently delving into the sector due to the apparent value available.

One fund – recently profiled in the Australian Financial Review – which is positive of the investment opportunities in the sector is UK-based fund manager Lanstead.

Lanstead's co-founder Mr Greg Kofford noted that "it seems like we have hit bottom in some of the commodity pricing and we are seeing a little uptick in companies coming through looking to advance projects."

This scenario has driven Lanstead towards the smaller end of the resource sector where it's finding opportunities in a range of commodity-exposed firms including a graphite developer, a tungsten producer and a lithium extraction business.

A safer bet?

Lanstead is no doubt right in suggesting that some of the deepest value opportunities presently available are to be found amongst junior mining and small exploration stocks.

For many investors however, the risks at this end of the market are arguably too great to stomach.

For conservative investors while the upside may be less, the downside risks would also appear lower for diversified resource majors such as BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO). This arguably makes these a preferred play on an eventual upturn in the commodity cycle.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »