Tags: David | Dreman | Oil | Mining | buy | Now

David Dreman: Don't Be Afraid to Buy Oil, Mining Stocks Now

Wednesday, 02 Jun 2010 08:45 AM

Dreman Value Management head David Dreman likes beaten down mining and oil stocks now, including Rio Tinto, which has threatened to pull out of Australia, where a huge tax increase on mining profits has been proposed.

“We think the proposed 40 percent Australian tax is likely to come down some,” Dreman says. “And since both Rio Tinto and BHP have gone down very significantly, we think there’s some value there.”

“We also think there’s a good deal of value in some of the exploration and development companies in the United States that have been going down since this enormous BP spill.”

“I think there’s value in some of these natural resource stocks now.”

In addition to Rio Tinto and BHP Billiton, Dreman says he likes Chesapeake, Apache and Freeport McMoRan and some manufacturing stocks.

As to whether actions on Capitol Hill will re-rate mining stocks: “I think they’ve already been pretty significantly re-rated by the market,” Dreman says.

The British oil giant is worth $75 billion less on the open market than it was when the Deepwater Horizon rig exploded six weeks ago, the Associated Press reported. Other companies involved in the spill — Transocean, Halliburton and Cameron — have all lost at least 30 percent in value.

“Whilst it may be tempting to see the ... fall in BP’s market capitalization as more than pricing in potential costs and liabilities, we still think there is a rating issue for investors to address,” Lucy Haskins, an analyst at Barclays Capital, told the Financial Times.

“We find it difficult to see why BP should regain a premium rating to the sector given the uncertainties still surrounding the management of the spill and the reputational and possible opportunity costs to the company in the longer term.”

“Despite this setback, the shares have not become step-out cheap relative to their peers.”

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Dreman Value Management head David Dreman likes beaten down mining and oil stocks now, including Rio Tinto, which has threatened to pull out of Australia, where a huge tax increase on mining profits has been proposed. We think the proposed 40 percent Australian tax is...
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Wednesday, 02 Jun 2010 08:45 AM
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