bull market in metals is just beginning

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    Which is the better buy now, technology or mining stocks?

    Surprise -- the winner is mining stocks.

    They have more momentum: Dull ol' mining stocks such as Inco (N:NYSE - commentary - research) are up 44% in the last six months vs. 36% for the technology-laden Nasdaq Composite Index.

    Mining stocks have more upside potential: Cyclical metal stocks are just about six months into a two- to three-year bull market cycle based on accelerating economic growth, while the technology sector has largely discounted its recovery until well into 2005.

    And mining stocks are less risky: Even a mining stock like Freeport-McMoRan Copper and Gold (FCX:NYSE - commentary - research), which is up 98% in the last six months, still trades at just 19 times projected 2004 earnings, well below the 23 to 24 times earnings the stock sees at cyclical peaks. It's also certainly not nearly as risky as PMC-Sierra's (PMCS:Nasdaq - commentary - research) price-to-earnings ratio of 174 based on 2004 projections after its 111% run-up in the last six months.

    Yet I'll bet that the average investor's portfolio is heavy on technology stocks, especially after the Nasdaq's rally this year, and light on mining stocks. Jubak's Picks, for example, holds one energy stock, ExxonMobil (XOM:NYSE - commentary - research), but not a single mining stock.

    Time for a Change
    Well, let's fix that. Here are three mining stocks, Inco, Freeport-McMoRan and Southern Peru Copper (PCU:NYSE ADR - commentary - research), for you to research for your own portfolios. I'm adding Inco and Freeport-McMoRan to Jubak's Picks with this column.

    I'm starting with Inco because the story for mining stocks is especially easy to understand at this huge nickel producer. According to Merrill Lynch, all major excess nickel stockpiles had disappeared around the globe by mid-September. Norilsk of Russia, the world's largest nickel producer, had sold its 60,000 metric tons of uncommitted inventory. The last big inventory without a buyer is the 36,000 metric tons available for sale on the London Metal Exchange. At the current rate of global drawdown, that's about an 11-day supply. The nickel market is suddenly tight.

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