Rudi’s View: Momentum Favours Resources

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(
    [0] => Array
        (
            [0] => ((SFR))
            [1] => ((HGO))
            [2] => ((CSC))
            [3] => ((AAI))
            [4] => ((EVN))
            [5] => ((NST))
            [6] => ((BHP))
            [7] => ((RIO))
            [8] => ((MIN))
            [9] => ((LYC))
            [10] => ((AUB))
            [11] => ((SIG))
            [12] => ((CAT))
            [13] => ((NEM))
            [14] => ((NST))
            [15] => ((GMD))
            [16] => ((PRU))
            [17] => ((VAU))
            [18] => ((AAR))
            [19] => ((AUC))
            [20] => ((AZY))
            [21] => ((LRV))
            [22] => ((MAU))
            [23] => ((MEK))
            [24] => ((RXL))
            [25] => ((SMI))
            [26] => ((GMG))
            [27] => ((RMD))
            [28] => ((ALL))
            [29] => ((AMP))
            [30] => ((ANZ))
            [31] => ((BSL))
            [32] => ((GLF))
            [33] => ((GMG))
            [34] => ((ILU))
            [35] => ((SEK))
            [36] => ((TLC))
            [37] => ((XRO))
            [38] => ((EOL))
            [39] => ((LAU))
            [40] => ((ABB))
            [41] => ((BLX))
            [42] => ((BRE))
            [43] => ((CCL))
            [44] => ((QOR))
            [45] => ((RMS))
            [46] => ((REG))
            [47] => ((SDR))
            [48] => ((ZIP))
            [49] => ((LOV))
            [50] => ((UNI))
            [51] => ((BRG))
        )

    [1] => Array
        (
            [0] => SFR
            [1] => HGO
            [2] => CSC
            [3] => AAI
            [4] => EVN
            [5] => NST
            [6] => BHP
            [7] => RIO
            [8] => MIN
            [9] => LYC
            [10] => AUB
            [11] => SIG
            [12] => CAT
            [13] => NEM
            [14] => NST
            [15] => GMD
            [16] => PRU
            [17] => VAU
            [18] => AAR
            [19] => AUC
            [20] => AZY
            [21] => LRV
            [22] => MAU
            [23] => MEK
            [24] => RXL
            [25] => SMI
            [26] => GMG
            [27] => RMD
            [28] => ALL
            [29] => AMP
            [30] => ANZ
            [31] => BSL
            [32] => GLF
            [33] => GMG
            [34] => ILU
            [35] => SEK
            [36] => TLC
            [37] => XRO
            [38] => EOL
            [39] => LAU
            [40] => ABB
            [41] => BLX
            [42] => BRE
            [43] => CCL
            [44] => QOR
            [45] => RMS
            [46] => REG
            [47] => SDR
            [48] => ZIP
            [49] => LOV
            [50] => UNI
            [51] => BRG
        )

)

This story features SANDFIRE RESOURCES LIMITED, and other companies.
For more info SHARE ANALYSIS: SFR
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

Mining stocks are back in investors' favour in Australia and fresh strategy updates show exactly that.

In today's edition:

• Mining is back on the menu
• Watch the Aussie Dollar, Says UBS
• Smaller gold exposures
• Citi looks international
• Goldmans' convictions
• Morgan Stanley's convictions
• Ord Minnett's convictions
• Morgans' convictions

By Rudi Filapek-Vandyck, Editor

Share prices are up in the morning –if you’re lucky– but in the afternoon the selling orders arrive.

As calendar year 2025 is gradually approaching its expiry date (less than four weeks are left) such has now become the dominating trend for the Australian share market.

The ASX is noticeably lagging its international peers, making the current lack of direction extra frustrating for local investors.

A perfect storm. That’s more or less how I see the first lower, then sideways pattern that has gripped the local share market since mid-October.

It started with portfolio rotation into prior laggards and cyclicals as international investors started broadening their allocations on expectations of a better economic year ahead in 2026.

Soon after that a general anxiety spread quickly around the globe that AI was bubbling up and ready to implode.

And boy, has that brought out a lot of doom and glooming, including references to Dutch tulips, the internet mania, and even comparisons with late 1929.

Next bond yields started to move higher, first inspired by the UK, then by a policy pivot in Japan.

The latter has put the long-lasting JPY carry trade under pressure, no doubt impacting Australian equities as hedge funds and others need to liquidate in order to unwind vulnerable positions.

By now, Australian bond yields are on the rise too and there’s a very identifiable, local reason for it: the RBA is done with cutting interest rates. Inflation is too high. The economy is holding up (even though company results are revealing headwinds and disappointments).

Now, increasingly economists are starting to focus on when the next policy pivot –rate hike– might be on the agenda. Already, the first murmurs are the RBA meeting in February might well be a ‘live’ event, i.e. to hike or not might be in the balance of probabilities.

Look no further for explanations as to why most share prices are finding it incredibly difficult to rise sustainably. And for those quality and growth stocks that previously could do no wrong, the prospect of higher bond yields is weighing on valuations generally.

And so it is that price charts for most sectors on the ASX are showing a downward sloping pattern. A few seem to be moving sideways recently; staples, healthcare, and utilities.

Only one sector is consistently trending upwards: materials (i.e. mining and metals).

Mining is back on the menu

About a year ago the first predictions about a new multi-year up-cycle for commodities started doing the rounds.

As it turned out, more patience was required but commodities are most definitely back on investors’ radar as the end of 2025 is nigh.

With the exception of gold, which has had a wonderful time for quite a while, the sector had remained largely under the pump for a number of years and that, history shows, is usually an ideal breeding ground for the next upswing.

Higher inflation. Expectations for Chinese stimulus. More rate cuts from the Federal Reserve. Better economic prospects. You name it. Combined they all point in the direction of better conditions for commodities and producers.

In Australia, it is notable earnings estimates are on the rise post September and it is predominantly resources driven.

A recent strategy report by Wilsons adds a number of contemporary, less traditional sources of demand:

• Onshoring of supply chains and build-outs of strategic stockpiles by nations worried about vulnerabilities and external dependencies
• Strong growth in data centres and AI infrastructure generally
• Re-armament and renewed defence spending
• The global energy transition

On the back of all of the above combined, Wilsons points out the local mining sector now has the strongest growth prospects out of all sectors on the ASX, while trading on still relatively ‘cheap’ valuations.

At face value, such a beneficial set-up leaves a lot of room for further significant outperformance, but Wilsons still cautions: it’s better to remain selective.

Its two favourite exposures among base metals are copper and aluminium. Its view on iron ore remains ‘cautious’.

Wilsons retains a positive view towards gold.

For copper, the market is seen tightening further as growing demand meets supply disruptions, declining grades, rising costs, deeper mines and the lack of new large-scale projects, on top of more sovereign risks.

Most preferred exposure locally is Sandfire Resources ((SFR)).

Outside of the ASX100, the strategists refer to Canaccord Genuity (where the ‘old’ Wilsons analysts are now employed) where the preference resides with Hillgrove Resources ((HGO)) and Capstone Copper ((CSC)).

The global aluminium market too is projected to move into deficit for multiple years on the horizon.

Wilsons’ preferred exposure is Alcoa ((AAI)).

For gold exposure, the strategists refer to Evolution Mining ((EVN)) and Northern Star ((NST)) among large caps.

The preferred iron ore miner is BHP Group ((BHP)) which also happens to be the world’s largest producer of copper by volume.

Watch the Aussie Dollar, Says UBS

UBS strategists‘ focus is on the Aussie dollar. Where it goes, the mining sector follows.

UBS has upgraded the mining sector to an Overweight Model Portfolio allocation. Following three long years of persistent cuts to earnings forecasts, the sector is starting to enjoy upgrades and UBS strategists believe this could potentially last a whole lot longer.

Contrary to Wilsons (see earlier) UBS’ list of preferred investments has switched BHP Group for Rio Tinto ((RIO)); the reasoning is that if the sector is now staring at a multi-year upgrade cycle, the latter has more leverage to it.

Other new inclusions are Mineral Resources ((MIN)) and Lynas Rare Earths ((LYC)).

UBS stays put in its ongoing positive view towards Technology. The sector –currently out-of-favour in Australia, and that’s an understatement– remains Overweight in the broker’s Model Portfolio.

Have also been freshly added to the most preferred list: AUB Group ((AUB)), Sigma Healthcare ((SIG)), and Catapult Sports ((CAT)).

UBS’s international selection of best ways to play the ongoing positive outlook for gold includes one ASX-listed nomination; Newmont Corp ((NEM)).

When it comes to picking Australian exposures rather than international peers, the preference lays with midcap producers offering growth.

Key gold picks are Northern Star ((NST)), Genesis Minerals ((GMD)), Perseus Mining ((PRU)), and Vault Minerals ((VAU)).

Smaller gold exposures

Analysts at Moelis expect investor interest in gold companies to persist, including the smaller end of the spectrum.

Moelis doesn’t officially cover any of the smaller cap options listed on the ASX, but the below highlights some of the options available for investors not afraid to move with the more speculative money flows:

• Astral Resources ((AAR))
• Ausgold Limited ((AUC))
• Antipa Minerals ((AZY))
• Larvotto Resources ((LRV))
• Magnetic Resources ((MAU))
• Meeka Metals ((MEK))
• Rox Resources ((RXL))
• Santana Minerals ((SMI))

Citi looks international

Sector analysts at Citi don’t see BHP Group or Rio Tinto as the best options available to play the commodities revival theme in 2026.

On the one hand do these analysts believe current bearishness among investors towards iron ore and coal prices seems overdone, but with merely range bound pricing dynamics expected, there also seems little reason to expect both companies to surprise to the upside.

Citi is bullish base metals and constructive on precious metals. Its favourites are all international players, with Glencore taking top spot, followed by Anglo American.

Goldmans’ convictions

The selection of high conviction calls by analysts at Goldman Sachs remains limited to two inclusions from the ASX:

• Goodman Group ((GMG))
• ResMed ((RMD))

Morgan Stanley’s convictions

Morgan Stanley’s Macro+ Focus List last changed in September, post the August results season:

• Aristocrat Leisure ((ALL))
• AMP Ltd ((AMP))
• ANZ Bank ((ANZ))
• BlueScope Steel ((BSL))
• GemLife Communities ((GLF))
• Goodman Group ((GMG))
• Iluka Resources ((ILU))
• Seek ((SEK))
• The Lottery Corp ((TLC))
• Xero ((XRO))

Ord Minnett’s convictions

Ord Minnett‘s conviction list has been expanded with the inclusion of:

• Energy One ((EOL))
• Lindsay Australia ((LAU))

The other nine selected:

• Aussie Broadband ((ABB))
• Beacon Lighting ((BLX))
• Brazilian Rare Earths ((BRE))
• Cuscal ((CCL))
• Qoria ((QOR))
• Ramelius Resources ((RMS))
• Regis Healthcare ((REG))
• SiteMinder ((SDR))
• Zip Co ((ZIP))

Morgans’ convictions

Morgans’ key stock picks among consumer discretionary stocks are:

• Lovisa Holdings ((LOV))
• Universal Store Holdings ((UNI))
• Breville Group ((BRG))

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

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P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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