Rick Rule: "I am Buying the Most Hated Commodities Now"

Key Concepts

• Resource Cycle: The cyclical nature of investment and price movements in the natural resources sector.
• Barbell Portfolio: An investment strategy involving holding both very large, established companies and very small, speculative exploration companies.
• "Love/Hate" Investing: A strategy of investing in sectors or commodities that are currently out of favor with the market ("hated") to capitalize on potential future appreciation.
• Junior Portfolio: A collection of investments in smaller, early-stage exploration and development companies.
• Net Present Value (NPV): The current value of future cash flows discounted at a specific rate.
• Small Modular Reactors (SMRs): A type of nuclear reactor designed to be smaller, more modular, and potentially more cost-effective than traditional large-scale reactors.
• Purchasing Power: The amount of goods and services that can be bought with a unit of currency.

Summary of Interview with Rick Rule

This interview with Rick Rule, CEO of Rule Investment Media, at Minds and Money 2025 Commodity TV in London, delves into his perspectives on the natural resources sector, investment strategies, and specific commodity outlooks.

2025 Highlights and Investment Strategy

Rick Rule reflects on the past year, noting that while it was a "phenomenal year for Natural Resources," he personally found the preceding two years, when the sector was "out of favor," to be more opportune. He employs a strategy of "love/hate" investing, meaning he thrives when sectors are disliked by the market, as this presents more opportunities.

A key personal strategy he implemented was selling 25% of his junior portfolio. This action allowed him to recoup all of his initial capital, effectively eliminating his downside risk while retaining 75% of his potential upside. He emphasizes the importance of "taking the money" to realize gains, a lesson learned over his 50 years in the business.

Outlook for the Next Year and Portfolio Construction

Rule describes his current portfolio as a "barbell." This strategy involves two distinct investment areas:

1. Large-Cap Leaders: Investing in the "largest and finest companies" in the natural resources business. He believes these companies are currently undervalued on a historical basis and relative to their free cash flows.
2. Front-End Exploration: Investing in the "very raggedy edge of exploration" where companies have not yet gained market favor. He is positioning himself for where he anticipates money will flow in approximately two years.

He explicitly states that for new capital allocation, he is either investing in the "best of the best" (established majors) or in "front-end exploration." He has largely divested from the middle ground of his resource portfolio, which he built over the past six to seven years.

The Resource Cycle and Long-Term Outlook

Rule characterizes the current state of the resource cycle as being in "inning three of a nine-inning game." He supports this view with arithmetic and his beliefs about currency devaluation and commodity performance:

• US Dollar Devaluation: He projects that the US dollar will likely lose 75% of its purchasing power over the next 10 years.
• Gold as a Store of Value: He believes gold will maintain its purchasing power, suggesting a threefold to fourfold increase in its nominal price (in US dollar terms) over the same decade.
• Underinvestment in Productive Capacity: He argues that society has underinvested in essential commodities like copper and oil for 30 years, and this deficit cannot be rectified in just five years.
• Commodity Price Escalation: While acknowledging that near-term price escalation in copper might be tempered by a weak economy, he predicts that in five years, the nominal prices of oil, copper, and nickel will appear "fictional" compared to today's levels.

Uranium Sector Analysis

Regarding the uranium sector, Rule believes it "has a long way to go." However, he cautions that the uranium juniors are currently "fully priced" due to a significant fourfold sector-wide move. He notes the unusual situation where junior companies without actual uranium assets are trading at premiums.

Despite the current valuation of juniors, he highlights a unique advantage of the uranium market: the ability to sign long-term contracts (up to 20 years) that lock in price and volume. This level of cash flow certainty is unparalleled in other commodity sectors, except for basic electricity, and he believes this has not been fully factored into uranium equities.

Small Modular Reactors (SMRs) and Uranium Demand

Rule anticipates the breakthrough of the SMR sector to occur in approximately 10 years. He clarifies that the near-term future of uranium is not driven by SMRs but by:

• Delayed Shutdowns: Plants slated for shutdown are not being decommissioned, leading to lower-than-forecasted demand reduction.
• Japanese Restart: An increase in Japanese nuclear plant restarts is contributing to demand.
• Conventional Reactor Construction: A significant boom in conventional reactor construction is also a factor.

He estimates that SMRs will not see a rollout in the Western world for at least five to six years, with significant adoption beginning in the middle of the next decade.

Critique of German Energy Policy

When asked about Germany's energy policy, Rule expresses skepticism, particularly regarding its reliance on solar power. He humorously states, "the idea that a country where the sun doesn't shine would cast its future to solar seems odd to me."

Top Picks for 2026

When asked for his top three picks for 2026 in mining, Rule focuses on two areas:

1. Major Gold Companies: He believes big gold companies "still have a long way to go." He points out that Wall Street analysts are forecasting gold prices at $3,200 per ounce, while the current environment is around $4,200. This discrepancy, he argues, sets the stage for significant earnings surprises as companies sell at much higher prices than forecasted.
2. Oil and Gas: This is where he is personally allocating the majority of his capital. Over half of his portfolio is in oil and gas, and approximately 80% of his new allocations are directed to this space. He reiterates his "love/hate" strategy, finding oil and gas to be the "hated commodity in the world." He highlights the opportunity to buy "the single finest oil company in the world, Exxon," at a substantial discount to its Net Present Value (NPV). He anticipates its value could double or triple in five years, and he can "buy a triple at 60% of current net present value and get paid a 3.75% dividend while I wait."

Conclusion

Rick Rule concludes by expressing his hope that his insights will help viewers make money. He emphasizes that while booming commodities are attractive, "the hated ones are better because they offer better chances to make money." The interview ends with an anticipation of meeting again in Toronto in 2026.