Small resources showing signs of life

In a research note, UBS Small Companies Fund managers said they're seeing relative value in small resources. "Some of the top quality small cap industrial stocks have got pretty expensive. Where the unloved resources names are sitting at three times cash flow, others are sitting at 50 times," portfolio manager Stephen Wood said. The downturn in the resources industry has created benefits for those who’ve survived. "What we've seen over five years or more is a huge increase in efficiency. The competition for labour has disappeared. The cost of engineers is 30 to 40 percent lower than it was three to four years ago,” portfolio manager David Haddad said. "At the end of the day you have to recognise, whether it's oil or coal, at some point the transacted volume is going to peak. But that doesn't mean that if a very high quality, low-cost producer has been sold off for three times cash flow, it's not a good investment," Mr Wood said. Read the full story: (VIEW LINK)


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