Teck Resources Ltd. rewards nimble investors who can move against the current, selling the stock when times are good and buying it when the outlook is dismal.
Today, conditions are excellent for the Vancouver-based miner, and that suggests shareholders should consider departing from this roller coaster of an investment.
On the surface, this might not sound like a great idea, given Teck's stellar second-quarter results, released late last month.
Teck, which produces copper, zinc and steelmaking coal from mines in Canada, the United States, Chile and Peru, topped analysts' estimates with a profit of $577-million or $1 a share – way up from a profit of just 3 cents a share a year ago.
Analysts had been expecting a profit of 90 cents a share, according to Reuters.
The company's debt levels are also falling, which is good. Net debt per share declined to $9.59, according to a report from Canaccord Genuity, down from $13.42 a share last year, which is a steeper drop than analysts had been expecting.
The improvements follow strong base metals prices. Zinc has risen to its highest level in nearly a decade and the price of copper is near a three-year high, reflecting stronger global economic growth and limited supplies.
The London Metal Exchange Index is up nearly 18 per cent this year alone.
Teck's share price has been riding this good news. From its recent low near the start of 2016, when the London Metal Exchange began what would blossom into a rally of more than 50 per cent, Teck's share price has surged a remarkable 665 per cent.
But here's the problem: As a long-term investment, Teck has been a frustrating holding. Its wondrous gains have been followed by disastrous declines, for an overall return of negative-28 per cent over the past decade (not including dividends). As a trading opportunity, though, the stock has certainly delivered some action.
Consider these wild swings.
From May, 2008, until the bear-market low in March, 2009, Teck's share price plummeted 93 per cent.
Over the next three years, as the global economy began to recover from the Great Recession, the share price rose about 1,780 per cent, or more than an 18-fold return, outpacing the London Metal Exchange's gain of 176 per cent over a similar period.
Investors who held on were devastated though: The share price fell 94 per cent over the next five years, as the price of base metals declined more than 50 per cent, until the current recovery kicked in at the start of 2016.
Most stocks are volatile. But Teck's ups and downs are extreme, suggesting that investors need to lock in their gains at some point.
Is now the time? There's no definitive answer to that, but there are at least four warning signs that suggest the spectacular gains of the past 18 months might give way to something far more mediocre – or worse.
Base metals have been rallying to multiyear highs and the global economy has been performing well. This is good news, but remember that this is a stock that tends to get hit hard when ideal conditions start to deteriorate.
If this backdrop isn't enough to raise concerns that the stock is nearing a peak, then consider Teck's volatile profitability: This is a stock that rewards investors for buying when profit is slim and selling when it is fat.
Profit was just 12 cents a share in the first quarter of 2016, when the shares could be bought for less than $5. And profit was just 11 cents per share in the first quarter of 2011, when the shares traded for as little as $3.42.
But in the second quarter of 2008, when the shares traded for more than $30, profit was $1.14 a share. And today, profit is $1 a share with the share price slightly below $30.
Intrepid investors will point out that the share price is less than half of what it was in 2011, when the shares peaked at more than $64, suggesting the potential for further gains. But given this stock's record for dashing the hopes of long-term investors, you have to ask yourself if it's worth sticking around.