Simon King of Saturna Capital names two stocks tied to base metals, for investors who want to look beyond the beaten path for AI-related trades
Komatsu trades much lower relative to sales and earnings estimates than larger rival Caterpillar.
Simon Kim and his co-managers for the Saturna International Fund believe that the artificial-intelligence build-out still has a long way to go, despite market jitters over high valuations. So they are still "overweight AI" but are looking for stocks in related industries that trade at attractive valuations.
The Saturna International Fund SSIFX is rated five stars (the highest rating) within Morningstar's "Foreign Large Growth" category. As of Sept. 30, about 15% of the 40-stock portfolio was invested in U.S. companies, according to Morningstar's data.
During an interview with MarketWatch, Kim named Komatsu $(KMTUY)$ (JP:6301), the Japan-based manufacturer of heavy construction equipment, as an example of a value-priced investment tied to base metals, which he described as an industry that is "tangential to AI."
"Within base metals, there are not a lot of good companies," he said, because mining firms and financiers "have destroyed capital by investing heavily at the wrong times."
'They sit back and collect.'Simon King of the Saturna International Fund, on the business strategy of Altius Minerals
"What I am looking for is companies that track the metals price and have compounding alpha on top of that," Kim said.
"You get exposure to the metals price. If the supercycle hits, these companies will benefit," and, if not, you still hold compounding businesses at reasonable valuations, he said.
"Alpha" refers to how much something outperforms its benchmark or market average.
Komatsu and Caterpillar
The Saturna International Fund holds shares of Komatsu that are listed on the Tokyo Stock Exchange. There is also an American depositary receipt for the company.
Komatsu is Caterpillar's (CAT) main international competitor, although it is a much smaller company, with a market capitalization of $42.6 billion and a consensus 2026 revenue estimate of $28.18 billion for its fiscal year that will end in March, according to a FactSet survey of analysts. In comparison, Caterpillar's market cap is $333.63 billion, and its annual sales for 2026 are estimated to total $79.95 billion.
If we look at the stock price relative to forward sales estimates, based on consensus estimates for the next 12 months among analysts pooled by FactSet, Komatsu's ADR trades at a forward price-to-sales ratio of 1.5, while Caterpillar's stock price is 3.8 times forward sales. And the forward price-to-earnings ratio for Komatsu's ADR is 15, while Caterpillar's forward P/E is 23, according to FactSet.
Now take a look at a one-year chart, which shows better performance for Caterpillar, but a lot less volatility for Komatsu:
Caterpillar's stock has had a higher return than Komatsu's ADR over the past year, but it has been a bumpier ride for "CAT."
For one-year total returns though Monday, with dividends reinvested, Caterpillar takes the prize. But so far in 2026, Komatsu's ADR has returned 47.5%, while Caterpillar has returned 27.5%.
Over the past three years, Caterpillar's stock has returned 202%, while Komatsu's ADR has returned 92%.
According to Kim, Caterpillar "has shot up from power generation, since they sell backup generators (and now primary) for data centers, and demand has been ferocious," while Caterpillar's other business lines have also performed well.
"Komatsu does the same things, except that they are not selling the generators," he said.
Kim estimated that the market was placing a $200 billion valuation on Caterpillar's generator business. According to Caterpillar, power-generation equipment sales were $3.1 billion during the second quarter, providing 15% of total revenue, which came to $20.54 billion.
Kim said Caterpillar's power-generation segment could contribute 20% to 25% of the company's total sales next year, but he is still surprised that the market has been "valuing the rest of the biz at $150 billion."
"So it is either valuing [Caterpillar] incorrectly or Komatsu has some catching up to do."
A royalty play
Kim said that the Saturna International Fund tends to hold stocks for about eight years. He cited Altius Minerals, which is based in St. John's, Newfoundland, as an example of a company that has taken an opportunistic long-term approach to provide financing to mining firms at excellent terms during down periods. The company's main stock listing is on the Toronto Stock Exchange (CA:ALS), but the stock is also traded over-the-counter in the U.S. (ATUSF).
According to Kim, Altius's contrarian strategy under its co-founder and CEO Brian Dalton in the base-metals space has led the strong performance for its stock over long periods. These are total returns through Monday:
Company 2026 3 years 5 years 10 years 20 years
Altius Minerals (Toronto listing 36.4% 183% 258% 482% 893%
Altius Minerals (U.S. OTC 32.3% 173% 216% 445% 693%
S&P 500 13.4% 87% 83% 323% 722%
Source: FactSet
You can see that the U.S. over-the-counter shares of Altius haven't performed as well as the main listing on the Toronto exchange. The U.S. OTC shares trade in much lower volumes.
"This is the same business model as a Franco or Wheaton - the royalty model. These companies provide capital to a miner in exchange for future revenues," Kim said, referring to Franco-Nevada $(FNV)$ and Wheaton Precious Metas (WPM).
"They want to use capital when commodity prices are low, and people are looking for cash and they are desperate and giving good terms," he said.
"The interesting thing about this royalty model is it has outperformed base metals, as a sector, over the past couple of decades," he said.
Kim cited down cycles for base metals in 2016 and following Russia's invasion of Ukraine as examples of market disruptions that Altius was able to take advantage of.
"They sit back and collect" while waiting for new opportunities, he said.
Kim said the latest example was in the renewable-energy space. "In 2022 you had all these wind investments, and other power generators starved for capital," while at that time Altius, under Dalton's direction, "was buying up assets left and right."
Subsequent events "proved he was right" because of heavy demand for power for data centers, Kim said.
When asked about the high forward P/E of 54.5 for Altius's stock, which compares with a weighted valuation of 18.9 for the S&P 500 SPX, Kim said that for a mining royalty stock, price-to-book value is a more reasonable way to look at valuations. Altius trades at 2.3 times book value, while the S&P 500 trades at 5.6 times book, according to FactSet.
-Philip van Doorn
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