Monday, July 23, 2007

A Hard Look At Hard Assets

Times are flush in the Canadian province of Saskatchewan. Dare we call it a boom? "That's the way we've been describing it," says Maynard Sonntag, Saskatchewan's Minister of Industry & Resources. "Absolutely."

Sonntag ticks off the stats. Saskatchewan, which provides the world with a quarter of its uranium and sells the U.S. more oil than Kuwait, is one of two Canadian provinces to increase its gross domestic product for four years straight. Since 2002 spending on uranium exploration has jumped tenfold to $280 million annually. "We have more jobs than we have population," he says.

The recent performance of non-U.S. resources stocks such as energy, construction materials and precious metals reflects the go-go days in the resource-rich north. An index compiled by FactSet Research Systems, for example, shows that shares of nonenergy mineral companies outside the U.S. have gained an aggregate 66% over the last year.

Buyers beware. We looked at non-U.S. natural resources companies with U.S.-listed shares and market values over $10 billion. Of the 80 that qualified, 30 carried multiples of book value, earnings and sales all in excess of five-year averages. Only four stocks passed a simple value screen of price-to-sales below their five-year average.

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