Laying the groundwork for a resources rebound

Amid hard times, strong companies can get stronger, says CI's Bob Lyon.

Sonita Horvitch 8 April, 2015 | 5:00PM

Bob Lyon, senior vice-president and portfolio manager at Signature Global Asset Management, says that in times of weak natural-resource prices, companies with low-cost assets and high-quality management can still make money for shareholders.

A long-standing natural-resources specialist, Lyon has seen both the boom times in commodities and the periods of price declines. He says companies that are proficient in allocating capital are using the cyclical slowdowns and lower commodity prices to cull weak assets, buy strategic assets from weaker companies and improve operating efficiencies. This, he adds, establishes a strong base to allow these companies to take full advantage of a rebound in the commodity price. "These are the types of companies that we are looking to add to the portfolio."

Over the long haul, a key determinant of natural-resource prices is the marginal cost of producing the commodity, says Lyon. "This is the price necessary to bring production to market." The commodity price can vary above or below the marginal cost for shorter-term reasons, he says.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BHP Group PLC ADR45.48 USD-0.89
Devon Energy Corp9.78 USD-1.71
EOG Resources Inc40.71 USD-1.17
Franco-Nevada Corp188.01 CAD-2.30
Lundin Mining Corp8.44 CAD0.12
Pioneer Natural Resources Co95.78 USD-1.34
Rio Tinto PLC ADR64.42 USD-0.46
Whiting Petroleum Corp20.85 USD-0.67

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Sonita Horvitch

Sonita Horvitch  

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