Matthew Thompson chose Merafe Resources as his stock pick of the day. The company’s share price jumped after the company announced that it expected to report earnings growth of up to 82%. Thompson advises that, as with all commodity companies, you must look at the underlying commodity, which in Merafe’s case is chrome and ferrochrome, used in stainless steel products. There has been a shift in the Chinese economy from an infrastructure to a consumer-based economy, which has more use for stainless steel products. This led to a rally in ferrochrome and chrome prices last year and was good news for Merafe, which has moved from a position of net debt to one of net cash. According to last year’s earning the company is on a price-earnings ration of about 4.5, which, as long as the chrome and ferrochrome prices remain near their current levels, make Merafe look really attractive. OR LISTEN TO THE AUDIO:
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