Wednesday, November 12, 2008

Teck Cominco

The news continues to be dismal on the TSX, the Nasdaq and the NYSE. I've been following the Canadian mining company Teck Cominco for a while and am tempted to jump in for a small number of shares with the stock trading at under $7 Canadian, down from more than $50 in the previous 52 weeks.

The stock sold off massively today, when the CEO spoke in New York, not a good sign. The problem, in addition to rapidly falling commodity prices, is the very large ($9.8 billion US) debt load the company took on this summer in order to acquire Fording Coal. CEO Don Lindsay, according to, hinted that the dividend may be cut and/or new shares may be issued to help pay off the financing.

I made some money on this stock a couple of years ago, approximately doubling my investment, but sold too soon, at 65 (pre-split price.) The stock rose to about 90 before it was split two for one. If the dividend is cut or eliminated or new stock is issued. that could be a signal to buy again. According to RBC Dominion's Portfolio advice for Fall 2008, the stock was still a buy when it was trading at $44.(We'll forgive them this time, since hardly anyone called the end of the commodities bubble accurately.)

Chastened by the fall of Sherritt International since I bought more shares a couple of weeks ago, I will wait a bit longer to step back into Teck. But for hardier investors, this could be a golden opportunity to pick up shares of the mining giant at bargain prices.