Q: Can you pls provide an overview of the investment prospects for these 2 companies. Which do you believe to be more attractive? I have Teck with a +20% loss and am considering taking the loss and getting into FM....is that something you would do? Many thanks for your excellent service
5i Research Answer:
TECK is $26B, trades at 26X earnings, with a 0.94% yield, down 19% in the past year. It has a strong balance sheet (net cash now) and 20% EPS growth is expected next year. FM is $18B, 600X P/E, no dividend, up 25% in the past year. Its balance sheet has a lot of debt (4X cash flow) but it is expected to have much stronger earnings growth next year. It has had issues with the Panama government on a very large mine. If this mine is allowed to re-start, the stock should have a good bounce. Each has their qualities. But we would side with TECK here as the much safer entity overall, especially in a highly cyclical industry.