Is this a better way to buy into the ASX mining supercycle?

If you feel you missed the big ASX mining shares rally, there might be another way for you to find a bargain according to a leading broker.
The post Is this a better way to buy into the ASX mining supercycle? appeared first on The Motley Fool Australia. –

ASX shares better way to the mining supercycle

If you feel you missed the ASX mining shares rally, there might be another way for you to find a bargain.

Our big ASX miners have surged over the past year with the Fortescue Metals Group Limited (ASX: FMG) share price jumping 159%.

The BHP Group Ltd (ASX: BHP) share price rallied 79% while the Rio Tinto Limited (ASX: RIO) share price increased by 50% over the same time.

Has the bulk carrier left the jetty?

That’s enough to give anyone the case of the FOMO when the S&P/ASX 200 Index (Index:^AXJO) “only” managed a 17% uplift.

But those who loath chasing rocketing ASX share prices might find this other strategy more appealing.

Goldman Sachs have gone through the latest results from the mining sector and believe that ASX mining contractors are well placed to outperform in 2021.

Picks and shovels

It’s the old saying that the best way to profit from a gold rush is to sell picks and shovels. Many investors aren’t thinking that way given that ASX mining contractors have been left behind in what some believe is a commodities supercycle.

Some interesting takeaways from ASX miners during the profit reporting season include tight labour markets and wage inflation, noted Goldman.

The lead time for sample testing and equipment have also extended, which is putting upward pressure on prices.

These trends bode well for those who supply equipment and services to miners. Miners who are expecting to pay higher wages include Fortescue, Rio Tinto, Western Areas Ltd (ASX: WSA) and Mineral Resources Limited (ASX: MIN).

ASX shares to buy in the commodities supercycle

According to Goldman, ASX engineering and explosive companies that are best placed to benefit are the Emeco Holdings Limited (ASX: EHL), Orica Ltd (ASX: ORI) share price and ALS Ltd (ASX: ALQ) share price.

It’s worth noting that the Emeco share price fell 10% over the past year, while the Orica share price lost nearly a third of its value.

The ALS share price fared better as it gained around 34% over the period, but that’s still well behind the big miners.

Goldman has a “buy” recommendation on all three stocks.

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More reading

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Emeco Holdings Limited and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is this a better way to buy into the ASX mining supercycle? appeared first on The Motley Fool Australia.

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