Investing in mining stocks makes me uneasy. This is because there are so many exploration expenses to pay even before these companies know whether they have made a bountiful claim. But sometimes a sector is too alluring to ignore. As demand for high end products increases in the developing world, mining stocks have huge potential to profit. I recommend well-established mid- and small-cap firms that don’t place all their chips on one mineral claim.
Compass Minerals International, Inc. (NYSE:CMP) looks to be the stock to purchase in the mining sector. The company has increased its revenue over each of the last four quarters, from $179 million in the second quarter of 2012 to $384 million in the first quarter of 2013. That represents more than a 100% increase and is a sign that operations are expanding for the company. The general opinion of this stock has been weak, with Morningstar indicating a hold. However, the company is continuing to beat expectations, and that means the stock is likely undervalued.
While the revenue is increasing at a staggering pace, the company also has a stake in agriculture, which is an industry set to experience increased growth as the world food shortage worsens. Compass Minerals International, Inc. (NYSE:CMP) is heavily weighted in the potash fertilizer sector, and as crop production increases due to global food demand, there will be a greater need for potash.
Southern Copper Corp (NYSE:SCCO) is the company to purchase if you are looking for some of the best profit margins in the business. Not only has the company nearly doubled its revenue in the last four years, it also has a nearly 30% profit margin on a consistent basis. While revenue fell slightly from 2011 to 2012 (from $6.8 billion to $6.7 billion), the company has still reached a new level: in 2009 Southern Copper Corp (NYSE:SCCO)’s revenue was over $3.7 billion, and that increased to nearly $6.7 billion last year.
The company is one of the world’s largest mining firms, and processes minerals such as copper, zinc, lead, molybdenum, silver and coal. Investing in copper via such a large player in the industry is a safe way to get in on the metal. With China’s economy recovering, there should be an increase in copper demand.