Hudson Bay Minerals: Breakout Value in the Mining Space

Hudson Bay Minerals

Momentum is VERY GREEN. A lack of sellers should be somewhat concerning, but there’s a real chance we edge to the 4,300 level with some reckless abandon. Since entering long positions after the last momentum switch, I’m happy to take gains off the table. But there’s certainly more juice left to squeeze. I haven’t seen a market behave like this in 20 years.

I was wrong. And I think it’s important to admit this sometimes. The CPI figure came in lower than expectations. Housing and rent numbers were elevated. But energy pulled back just enough, and there was a drop in travel prices. Core CPI came in at expectations at 5.9%. 

On the other side of that news, it was a rip-your-face-off rally. The S&P 500 surged to 4,200 today, introducing a new resistance level. We’re roughly 132 points from the 200-day moving average and probably 180 points from ending the Bear Market. What on earth? 

So, what is the right move right now? Well, I’m keeping my close eye on a handful of “cheap” stocks and riding the F&Z score names. Today, I want to take a moment and show you a stock that I recently recommended… and why. 

Dr. Copper Rides Again 

Two days ago, the Wall Street Journal highlighted a takeover offer by BHP Group (BHP). It’s for a company called Oz Minerals Limited (OZL.AX), a metals and mining company in Australia. BHP Group offered $5.8 billion for the company. 

Why did Oz turn down the deal? They sit on a “better-than-gold” mine of copper, nickel, and other clean energy metals. Despite all of the recent declines in commodity prices, metal companies are doing something that most of their investors may not like. Turning down massive offers that would only boost share prices. After all, OZL stock on the Australia Exchange surged 35% on news of the offer. BHP may make another offer. But it’s not clear that OZL will sell. 

As I’ve noted, NOW is the time to buy up the companies that produce the real things that we will need for our costly appeasement to the Climate Gods. We can’t control public policy. And the ongoing shift toward clean energy will only accelerate with the U.S. government dropping hundreds of billions in new stimuli. So what’s the best way to take advantage of this situation?

Focus on Price and Value

I have been actively trading this market over the last two years to know all the big names in the alternative energy space. There are momentum names like ChargePoint (CHPT), Tesla (TSLA), and Workhorse Group (WKHS). It would be very hard for me to pony up money as a long-term investor in any of these names. Given their outrageous price multiples and lack of a competitive moat. 

But then there is value. And right now, I see a lot of value in small mining companies that trade at very attractive multiples with a kicker of positive momentum. Hudson Bay Minerals (HBM) is a Canadian mining company that produces copper concentrate (containing copper, gold, and silver) and zinc metal. It has properties in the U.S., Canada, Peru, and Chile. It’s been around forever, but few people seem to know the name. 

Hudson Bay Minerals Numbers

It has a market capitalization of just $1.2 billion and fell out of favor with investors and traders after the commodity slump since June. But this stock is trading for 78% of book value. While it’s a Canadian company (and I tend to only focus on book value around U.S. companies), I am increasingly bullish on commodity currencies like the Canadian Loonie and the Aussie Dollar. In an era of deglobalization, the two nations behind these currencies will be essential to the clean energy development of the West. I’m very pleased to focus on the small miners that may become takeover targets. 

Hudson Bay Minerals has absolutely surged over the last three trading sessions. We saw it rally from $3.71 on Monday to more than $4.60 on Wednesday. But if it traded at book value and currency issues eroded, the upside is $5.80 to $6.00. The stock had a nice breakout over the last few days. Relative Strength (RSI) increased into positive territory, and the same goes with Money Flow Index (MFI). The MACD indicator signaled a possible run higher, followed by positive signals on the ADX 14. 

I use these four primary indicators (there are three additional tools) to identify possible breakouts in the small- to mid-cap space. As you can see, HBM was poised for a breakout in positive conditions. You can replicate these trades… but it might be easier if someone else has the time to pour through 6,500 pieces of hay to find that perfect needle.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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