Precision Points: Sick of hearing about gold? Precision’s Dermot Woods finds value in other areas of the stock market

Record prices have gold in favour, but Precision Funds Management’s Dermot Woods joins Stockhead to get creative with other value ASX stocks.

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In Precision Points, Precision Funds Management executive director Dermot Woods draws on insights from two decades on the front lines of equity markets to share his expertise with Stockhead readers.

Gold's fresh all time high of over US$2870/oz on Wednesday, close to $4600/oz Australian, has all the hallmarks of a squeeze, with queues to withdraw from Bank of England vaults hitting weeks.

Powering that, reportedly, is the wide spreads on offer for selling gold into the United States, where buyers are desperately seeking gold in the fear President Donald Trump could issue new tariffs on precious metals, distorting the market for bullion.

How long that holds remains to be seen. But gold's epic bull run has seen some fund managers looking for opportunities elsewhere, with the rest of the commodity market seeing little enthusiasm from investors.

Precision Funds Management's Dermot Woods doesn't think the phenomenon can hold forever, with prices and a lack of investment flows into other commodities like copper and coking coal masking the very tight conditions seen in physical commodity trading.

"Physical markets are obviously tight in a lot of products and we're not seeing big stockpiles," he told Stockhead.

"A little bit of extra demand or a little bit of supply disruption and you could see commodities move quite sharply.

"That aside, there's plenty of sectors where the money being made is decent and the valuations are pretty reasonable."

Old king...

Woods says copper and coal are two obvious examples.

Copper hit all time highs of almost US$11,000/t last May but has since settled back to ~US$9000/t, historically high but well short of modern incentive pricing.

"(In copper) we just don't see the projects coming on. It's just such a hard space with so much capital required to bring on projects, so it's definitely open to supply disruption," Woods remarked.

"The hardest thing to point out in commodity prices and picking them is always difficult, is when they'll move.

"All you can do is identify sectors where you think they could really be prone to disruption, and copper's definitely one of them. It's exacerbated again by the lack of choice of things to buy in the market."

Coal has a similar profile on the supply side, with heavy concentration of seaborne met coal for steel production out of either environmentally, weather or politically exposed environments like Canada, Queensland and Russia.

"There's people making decent money at the moment," Woods said.

"Whitehaven Coal's (ASX:WHC) a big one we own, they've done a really good job buying those BHP (ASX:BHP) assets and bedding (them) down.

"They're still making really good margin at the moment.

"But some people are making not very much margin at all, which is a fair indicator that the sector will turn because there hasn't been a lot of money going in."

Precision has been adding Whitehaven at current prices – the miner was trading at a touch over $5bn on Thursday for a price of $6.26 having lots almost 20% in the past year. Woods sees the potential for premium hard coking coal, currently US$189/t, to break above US$200 again.

"You do get price dislocation in that market relatively frequently, at the moment the price is sub 200 bucks a tonne for coking coal and it doesn't tend to stay there very long," he said.

"We think US$250/t is probably a more reasonable price and it can run very hard. Because the sector is perpetually underowned – at the moment anyway because of ESG – we think there's plenty of value there."

Big MAC

In copper, Precision's key pick right now is MAC Copper (ASX:MAC).

Formerly known as Metals Acquisition Corp, the ASX and US listed play is aiming to restore the Cobar operation in New South Wales to its former glory, eyeing long term production rates of over 50,000tpa from the high grade mine bought in 2024 from Glencore.

The mine, also known as CSA, produced 41,128t at a total cash cost of US$2.70/lb in 2024, as the company restructured its liabilities to cut net debt from US$253m to US$132m between March 31 and December 31, lopping US$100m off that number in Q4 alone.

"It's an Australian asset, so it's benefitting from the Australian follar, which is helping a lot of resources producers at the moment.

"US dollar copper prices drifted 10% since September-October, Aussie dollar has drifted 10%, so Aussie dollar copper is flat, essentially.

"MAC's down 30-35% and they've been doing their best work over that period in terms of they had a balance sheet that was pretty constrained post the deal and they had to bed fown the operations.

"They've done a pretty good job on that."

Signing up contractors

The ASX benchmark has been volatile over the past week, responding with bone-jarring volatility in response to news around Donald Trump's tariff announcements re: Canada, Mexico and China.

But looking through the noise, Precision sees Chinese domestic demand as a more important pendulum for commodities.

Outside miners, Woods thinks the upcoming earnings season will be a "very good" one of for mining and civil contractors.

Precision's largest holding is SRG Global (ASX:SRG), which has doubled over the past year on M&A and an improving earnings outlook.

"I think the corner turned a year ago for (contractors)," Woods said. After bearing the brunt of cost inflation in the mining and civil sectors, easing inflationary pressure and consolidation has seen a number of contractors improve their cash generation.

"SRG ... just ticks all the boxes in terms of churning out cash, growing, paying dividends. (It has a) rock solid balance sheet, it's taken advantage of low prices to do some really good M&A in the last few years," he said.

"Macmahon Group (ASX:MAH) is another one we've liked for a long time, but it has gone from half NTA (net tangible assets) to a small premium roughly to NTA.

"Emeco Holdings (ASX:EHL) is the one we think that's probably lagged the sector, but now I think it's just starting to play catch up.

"It's probably a year behind in terms of cash generation because of its problems with that Pit N Portal acquisition.

"We took advantage of real share price weakness on that plus 40% discount to put value to buy some of that a couple of years ago.

"That trade's just been coming good in the last six months or so and I think as they print cash the market will become accepting that they've got some real capital discipline as well."

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

Originally published as Precision Points: Sick of hearing about gold? Precision’s Dermot Woods finds value in other areas of the stock market