Resource stocks have been crunched again today after another tumble on Wall Street overnight and falling commodity prices. However, for someone who largely missed the great resources boom, this 20-30% correction in resource company shares prices over the past month represents a good buying opportunity.

From a net cafe in George St Sydney I’ve just bought $500 worth of shares in Bendigo Mining, Newcrest Mining, Minara Resources, Worley Parsons, Paladin Resources and Excel Coal in an attempt to get some more balance into a portfolio which is heavily weighted towards industrials.

Sure, each of these companies is still well up for the year but they are down an average of almost 5% in morning trade, something you don’t see too often. All these fears about inflation and rising interests don’t change the phenomenal China growth story which has underpinned the resources boom.

I’m aiming to finish up with a portfolio of about 200 stocks for future AGM activities, so further falls just represent further buying opportunities and I’ll be chasing the market down.

However, with a 10% correction now well and truly reached, it’s worth contemplating the companies or funds which picked the top of the market. The $50 billion-plus Queensland Investment Corporation has recently been selling substantial equity holdings in a move that now looks timely.

The chairman and CEO of gold miner Oxiana Resources were dismissive of suggestions at their AGM a few weeks back that they look at locking in some of the extraordinary gold upside with some prudent opportunistic hedging. Founder Owen Hegarty could only see gold running higher forever, but with bullion now having tumbled from $US730 an ounce to just $US560 an ounce over the past month, it would have been a hugely profitable exercise.

Similarly, it is shame the Reserve Bank didn’t follow our advice and cash in some of its remaining 80 tonnes of gold at the height of the bubble. Oh well, we’re only talking an opportunity cost of about $300 million so far for a government that is still worth negative $20 billion.

And let’s hope David Murray has finally got his act together at the Future Fund and is using this correction as an opportunity to start putting some of that $18 billion in cash on deposit with the Reserve Bank into shares. If the money had simply been lodged with the Commonwealth’s existing PSS/CSS super funds they wouldn’t have still been faffing about buying computers, setting up systems and trying to hire a CEO on a ridiculous package.

Peter Fray

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