KAZAKHMYS AND THE PARALLEL UNIVERSE…

And so it was that I came to be in this strange hybrid of groundhog day and what appeared to be a parallel universe…

Everything sure looked the same – the landscape, the sky, my house… But still, there was something troubling me. I rubbed my eyes profusely to make sure I was not seeing things. Could it really be? Was this yet another day of mining shares falling in price… Seemingly, for countless days, weeks and months… And yet, the major market indices continued to probe new highs. A stock called Twitter (of all things) that doesn’t have a cat in hells chance of making a profit to ever justify its valuation was valued at almost the same as the entire UK mid cap mining spectrum. What was I missing, was it for real?

Dazed and fuddled, I asked myself if I was drunk or am I really living in this strange environment where stock prices of solid mining stocks get sold down day after day to valuations that bear no resemblance to reality.

It was the stock price of Kazakhmys that really had the birds circling around my head though. An announcement was made in this parallel universe where it had just sold off a power division for nearly $1.3bn in cash and that when added to the existing net debt of $550m gave it an enterprise value of just half a billion pounds. I looked closely at the balance sheet and there it was, a tangible NAV that was almost 3 times the current market cap! The rump mining division that had made over half a billion pounds in EBITDA in 2012 was in fact valued at less than the one times EV.

In this strange universe I was almost being paid to buy the shares! Dumbstruck, I asked myself what I was missing. Out of the blue came the answer – “the ‘anal’ysts” – yes the ‘anal’ysts those perpetual behind the curve players that collectively cost their investor followers billions each year when they blithely follow them and take their advice. Buy they said at 700, 800p, 900p only 12-18 months ago and now they tell me to sell…?

I was perplexed. In this parallel universe was I actually looking at stock prices upside down and that was why it was called a parallel universe? And so, I stood on my head to see if this changed things. Of course, all it did was give me a thumping great headache..!

And then I realised, in this strange parallel universe that if I was to be stuck here that I should apply my experiences from “home”, that I should greedily take advantage of these valuations. Question is would the groundhog day cycle ever be broken however, and one day, the true value of these stocks would come to the fore and put a smile back on my face…

To be continued…