TFSA Investors: Put Your $6K Into This Mining Stock With 45% Upside

The TFSA is for growth. This stock is one of the best growth plays in the metals and mining space on the TSX!

| More on:

Setting target prices is important. Knowing how much upside an investment has and the level at which one wishes to reassess a given investment is equally important. In this article, I’m going to discuss why I think Lundin Mining (TSX:LUN) has at least 45% upside right now. This is a stock every TFSA investor ought to consider right now. The TFSA is the perfect place to put your money to work on long-term growth stocks like Lundin.

Copper exposure has been great for this stock

The majority of Lundin’s revenue is derived from copper mining. The copper sector is one which has been blessed with a rising commodity price environment of late.

I think the fundamentals for copper remain robust not only for 2021 but for many years. We’re in what I think is the middle-innings of a bull market in copper. High levels of stimulus and low interest rates are fundamental forces that bode well for copper prices. If we continue to see an industrial rebound from this pandemic, copper will continue to perform well.

These aren’t just my own opinions. Analysts from Goldman Sachs recently pointed out that the price of copper could increase to more than $5 per pound by early 2022. This would imply an upside of around 45% from current levels. Additionally, I view Lundin as a better way to play copper than the commodity itself, due to this company’s excellent operating metrics and operational efficiencies. If the company is able to continue on its current trajectory, we could see much higher capital gains than the 45% commodity price upside potential indicates.

This is more than just a copper company

One of the things I like most about Lundin is the diversified nature of this company’s operations. This is not a pure play on copper. Rather, this company earns about one-third of its revenue from other metals. Additionally, the company is geographically diversified and has proven itself to be a stable growth play in a rather depressed commodities market over the past decade.

Investors could see impressive cash flow growth if zinc and nickel prices pick up to a similar degree as copper (the other major components of Lundin’s business). I think base metals in general are undervalued right now. Accordingly, I think Lundin is a great way to diversify base metals exposure in under-diversified portfolios.

Lundin is also a great dividend company, despite a low yield of around 1.4% today. The company is expected to grow its dividend by around 50% when Q4 earnings are released. I expect future dividend increases to provide a nice income stream for investors seeking long-term income growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Invest $7,000 in This Dividend Stock for $672 in Passive Income

High yield can be an essential requirement when you need to start even a modestly sized passive income with a…

Read more »

Canadian Dollars bills
Metals and Mining Stocks

2 Cheap Canadian Stocks Under $20 to Buy This November

Cheap TSX stocks such as Endeavour Silver are trading at an attractive valuation in November 2024.

Read more »

nugget gold
Metals and Mining Stocks

Is Franco-Nevada Stock a Buy for its 1.06% Dividend Yield?

A top gold stock with a modest yield is a buy for its lengthy dividend-growth streak.

Read more »

todder holds a gold bar
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell or Hold?

Investing in quality gold mining stocks that trade at a reasonable valuation could help you beat the TSX index over…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Buy?

Let's dive into whether First Quantum Minerals (TSX:FM) is worth buying at current levels, or if investors should sit this…

Read more »

nugget gold
Metals and Mining Stocks

Competitive? Beat the Market With These 2 Dividend-Paying Growth Gems

Investors looking to beat the market buying dividend stocks right now need to focus on this right sectors. Here are…

Read more »

nugget gold
Metals and Mining Stocks

A Canadian Billionaire Investor Sold Micron Stock and Bought This TSX Company Instead

Prem Watsa focuses on value over short-term growth.

Read more »

Concept of multiple streams of income
Metals and Mining Stocks

Is Franco-Nevada Stock a Buy for Its 1.2% Dividend Yield?

Gold royalty stocks represent a niche in the precious metals industry. They have different dynamics from mining stocks.

Read more »