We sold a company we like in EVN on Monday. However, sometimes, even good companies can be stretched from a valuation perspective, especially when they are correlated with volatile, cyclical commodity markets. The bulls will likely forget that EVN has corrected in the order of 20% or more on three occasions in the last two years, and we believe another correction is overdue – note that, all things being equal, we could see ourselves re-entering EVN if it corrects by 15-20% in the coming months. However, 25% of EVN revenue comes from copper, and we believe the industrial metal is vulnerable to a deeper correction after threats of a 25% tariff by Trump sent the metal surging higher in an unorderly market as traders scrambled to buy copper for US delivery. Hence, we may look elsewhere the next time we search for gold exposure, depending on our outlook toward Cu at the time.
- We can see a pullback towards $6.00 if gold fails to hold above $US3100.
MM is neutral toward EVN short term
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