Speaking at the New Orleans Investment Conference, Tavi Costa, partner and portfolio manager at Crescat Capital, discussed sentiment in the resource sector, including where he sees opportunity today.
‘Everyone is sort of waiting for this breakout in gold, otherwise there’s no party,’ he said on the sidelines of the event. ‘Everyone is just waiting patiently, and in my view it’s going to happen — it’s inevitable that we’re going to see a breakout. Then other commodities should follow, and then the valuations of companies should be rerated.’
In terms of timing, Costa said that back in 2018 he started looking closely at CAPEX trends among mining companies. ‘You can kind of see when that bottoms out you tend to see a bull market in commodities. You just don’t know on the macro side what the trigger is going to be, but the foundation of the thesis is there,’ he explained.
‘I feel like everything is really coming together right now, (but) the sentiment is really bearish,’ Costa continued. ‘I am not that way at all. I’m extremely bullish, I’m really focused right now … you don’t want to lose focus at the wrong time.’
Moving forward, he expects to see the traditional 60/40 portfolio fall by the wayside. ‘Those two allocations need to be redefined,’ he said. ‘I think commodities are going to play a role there. I think gold is going to be one of those assets that is going to be competing with Treasuries, just like central banks have been changing their allocation.’ Notably, he pointed out that recent research shows 70 percent of advisors have portfolios with less than 1 percent gold.
‘I think (gold is) going to be one side. And then a basket of commodities will probably take the other side. And I would say emerging markets, especially rich resource economies like Brazil, will probably take a part of the equity market portion.’
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.