Borrow and Sell when you least need to

’tis the season to focus on the new extremes being exhibited in selected stocks.

Today, I want to discuss Australian listed mining and related services company called Mineral Resources (MIN.AX).

MinRes is a high quality enterprise and managed very well with an extremely competent team. It has a solid (conservative) balance sheet, attractive margins and exhibited ravishing growth.

Currently its price action (I’ll discuss valuations another time) is trading at extremes. The charts below show that MinRes is trading at a stretch above its 200 day moving average (on a Weekly basis) and at 2 standard deviations above its Monthly mean. This doesn’t happen too often.

Previous visits to these levels have married up with oversold readings and peaks in its trending strength.

It’s at this point that investment bankers should be circling and pitch that MinRes either;
a) raise money by offering shares in the secondary market,
b) use its ‘inflated’ stock as currency to make acquisition or
c) borrow cheap debt

December 9, 2020
by Rob Zdravevski
rob@karriasset.com.au