[TOP STORY] How far will the commodity run go?

While investors wait for resources’ divvy payments, Disney is a great story with more likely to come: Nick Kunze of Sanlam Private Wealth.

SIMON BROWN: I’m chatting now with Nick Kunze, senior portfolio manager at Sanlam Private Wealth. Nick, I appreciate the early morning. I mentioned commodity prices. Some updates – on Friday we saw [trading statements from] Anglo Platinum … Thungela Resources. Anyone who thought this commodity run was over – it is not. It has legs.

NICK KUNZE: Morning, Simon. Yes, it does. And it has legs for a number of reasons. You will know they’ve run pretty hard, but we are heading into, I guess, a new paradigm. We’re heading into a new environment where investors are hungry for yield. We’re heading into a higher interest-rate environment; we’re heading into a higher inflation environment and these miners tend to tick those boxes. They are cash-flow positive, they are inflation hedges at the best of times. Just look no further. You mentioned Thungela and Angloplats. Look at BHP, Anglo American – they both hit new highs in pounds last week. Investors are betting, I guess, on bigger cash returns too. So look out for those big divvy payments as well.

SIMON BROWN: Yeah. That’s just it. We saw the commodity prices peak, what, about mid-year last year, certainly in the PGM space. There was a bit of a sense that maybe it was over, but we’ve got the Resi (FTSE/JSE Resource 10) at all-time highs. It’s finally above those 2008 levels and, as you say, [there’s] a lot behind it to say there’s more coming and dividends galore.

NICK KUNZE: Exactly. In South Africa we tend to – I guess it’s our history, it’s our DNA – we look at the PGM basket and we keep looking at the gold price knocking around $1 800/oz, wondering when it’s going to get going. You mentioned the rhodium price in your intro, and look at the steel basket. Look at rolled steel and aluminium and all the basket of that metal that traded in the Dalian [Commodity] Exchange. They also had all-time highs last week. Yes, they did. We kind of think they peaked at the middle of last year, but if you look outside on the wider spectrum, they’re all hitting all-time highs.

So yeah, I think this thing’s got a lot more legs, I really, really do. If we see more and more inflation prints come out of Europe this week, like we saw in America last week, these eye-watering numbers, expect the commodities to continue to run, quite frankly.

SIMON BROWN: Yeah. I take your point on that, and getting it back above those 2008 levels is significant. That’s what aluminium did last week.

Quickly going offshore – I don’t know if Disney’s a stock you follow? … but that was an amazing set of results. Parks are just booming, Disney Plus, everything.

NICK KUNZE: Funnily enough, I looked at it a few years ago, pre-Covid; they’re turning about $80. It just was one of the stocks that no one really looked at. Everyone was throwing all their cash at Netflix, and that was the sort of the go-to stock. Then over the last year or two they’ve pivoted, as you mentioned, Disney Plus – you forget what their back catalogue is and what they actually own. Half the stuff they own they rented out to Netflix anyway. So they decided to take those back, as you said reopening trade, with more and more people going back into those theme parks and so on. It really is a great story. Don’t pick a top on this one yet, I think there’s more to come.

SIMON BROWN: Yeah. What I noticed from that was not just people going back to parks, but they’re actually spending ahead of what they used to. It’s kind of like when we do get out we tend to open the wallet a whole bunch.

Nick Kunze, senior portfolio manager at Sanlam Private Wealth, as always I appreciate the early morning time.



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