Investors shift away from banks and retailers as analyst predicts BHP could nearly double CBA’s valuation

High interest rates and elevated living costs are prompting investors to shift away from banks and retailers towards miners expected to benefit from rising commodity prices, according to Australia’s leading share market analysts.

The expectation that miners will extend their market-thumping outperformance over the 12 months ahead comes after three-quarters of Australia’s listed companies handed in profit reports this August.

Charlie Aitken, the investment chief at $21.4 billion hedge fund Regal Partners, even thinks mining giant BHP will eventually come close to doubling the market value of Commonwealth Bank, as a next-generation commodities boom creates long-term wealth for investors.

BHP still tipped to rise

“Pound for pound, BHP was the standout result of the ASX reporting season this week,” Aitken told investors this week. “As overvalued and growthless domestic industrials succumb to reality, BHP’s results and outlook appear better relatively and absolutely by the day.”

Aitken also argues analysts are underestimating the outlook for copper because their forecasts fail to fully account for tightening supply, rising demand and the impact of inflation on commodity prices.

Regal expects BHP to deliver dividend windfalls substantially above market expectations over the medium term as the high-flying hedge fund group maintains its conviction that investors should position for another commodity price boom.

BHP shares hit a record high of $69.22 on Tuesday and have jumped 57 per cent over the past year.

The bullishness extends beyond copper, with investment managers also seeing opportunities in gold, lithium and rare earths as supply constraints and geopolitical tensions reshape commodity markets.

Other potential wealth winners

Canaccord Genuity, one of Australia’s leading mining research houses, is particularly bullish on rare earths as Western governments scramble to develop supply chains independent of China.

One of the nation’s top mining analysts at Canaccord, Reg Spencer, has a buy rating and $8 valuation on Brazilian Rare Earths, almost double its $4.10 share price on Wednesday.

The explorer’s Rocha da Rocha rare earths project remains years from production, making it a higher-risk bet on the growing strategic importance of the minerals.

The lithium sector has been volatile, but is also tipped as another long-term winner from the shift to electric vehicles and technologies using artificial intelligence.

David Tuckwell the Chief Investment Officer at ETF Shares and broker RBC Capital are both positive on major West Australian producer PLS Ltd.

The miner reinstated dividend payments on Monday, signalling confidence it can return substantial amounts of cash to shareholders while continuing to invest in additional production.

“Production is growing at 11 per cent a year and recovery rates are improving,” Tuckwell said.

He also expects the dividend to become more attractive to investors ahead of changes to capital gains tax announced in the Labor government’s Budget, due to take effect from July 1, 2027.

RBC has a a buy rating and $5.50 price target on PLS shares.

South32 and Mineral Resources

Another mining giant attracting bullish calls is South32, which Morgan Stanley rates a buy.

The diversified miner recently increased ore reserves at its Sierra Gorda copper mine in Chile by 61 per cent to 1.1 billion tonnes, extending the outlook for one of its key growth assets.

Its $US4.7 billion Hermosa project in Arizona also gives South32 exposure to the US push to secure domestic supplies of zinc, lead and silver, three metals considered strategically important to critical-minerals supply chains.

“South32 has potential to continue generating significant cash flow, enabling strong shareholder returns along with potential to grow base metals production through its Hermosa project in the US,” said Morgan Stanley.

UBS Australia has also turned positive on lithium and iron ore miner Mineral Resources, giving the stock a buy rating this week.

The investment banks says Mineral Resources can deliver capital gains for investors, assuming lithium prices lift in line with growing long-term demand for electric vehicles.

“Given the [miner’s] cost structure, we expect any incremental gains to translate into outsized earnings per share and free cashflow growth,” UBS said on Tuesday. “Mining services continue to underpin earnings and limit [share price] downside, leaving investors well positioned to benefit from any recovery in lithium pricing.”

UBS has a $79 valuation on Mineral Resources, compared with its latest share price of $66.68.