By Rapha Angel
Inflation, loosely defined, is too much money chasing too few goods. The mere mention of the word makes people quake, when we, as investors, ought to have a core of steel…or gold. An inflation-proof stock would be very attractive, acting like an anchor to every portfolio. Let's take a look at attractive ideas worthy of further research.
Southern Copper Corporation (SCCO): It is currently priced at around $33; its dividend yield is lovely at 8.4%, earnings per share is $2.7, and price-to-earnings ratio is 12.29. It has a high return on equity of 57.32%, its debt-equity ratio is 66.6%, and current ratio is 4.18. Debt is high, yes, but its quarterly year-on-year growth is a nice 81.6%. This year's growth is expected to be 53%, next year's is down to -6.4%, with growth per annum estimated at 10.47% for the next five years, which is good as it was negative 3.25% in the past five years. The high price target is $47.50. Southern Copper was praised here for its high dividend rate and good value. I call it a medium Buy. It loses points for me on account of its debt. If you are looking for some dividend and profits for this year, you can buy.
Freeport-McMoRan Copper & Gold Inc. (FCX): Cost per share is $42, dividend yield is 2.4%, earnings per share is $5.72, and price-to-earnings ratio is 7.34. It made headlines when the value of the stock was speculated upon along with its low P/E ratio. Its return on equity is 43.09% and debt-equity ratio is 19.58, lower than some of its peers. Its current ratio is 3.37 and quarterly year-on-year earnings growth is -10.6%. Growth expected for five years is 5.54% per annum; growth for this year is 5%. With a high target of $ 66.00, I would say add this to your watch list. Buy if you dare. The best that could happen is it reaches $66 really fast.
Rio Tinto Plc (RIO): Priced at $54.3 per share, the dividend yield is 2%, earnings per share is 8.16, and price-to-earnings ratio is 6.66. Market cap is 104.65 billion. Return on equity is good at 29.04%. Quarterly earnings growth is 29.8%. Debt-equity ratio is 26.23 and current ratio is 1.57. Five-year projected growth per annum is 8.75% with 2012's growth being 19.7%. Rio Tinto recently announced that it has completed acquisition of Hathor Exploration. With a high target of $115, this is a buy in my books.
BHP Billiton Limited (BHP): Costing approximately $ 74 per share, this company yield dividend of 2.9%, earnings per share is 8.54, and price-to-earnings ratio is 8.78. Its return on equity is 44.72%, and its debt-equity is 27.63, current ratio being 1.28. Its growth predicted for 2012 is 58.1%, and per annum growth for the next five years is 7.95%. In recent news, diamonds were not forever for BHP, and it was planning to divest itself of that section of its operations and grow its petroleum and mining business instead. Its price could go up to $116, which would be nice. This is a stock worth considering.
Vale S.A. (VALE): One share costs $22, earnings per share is $4.16, price-to-earnings ratio is 5.43. Market cap is $116.2 billion. Quarterly earnings growth is -25.2%, return on equity is 29.63%, debt-equity ratio is 33.61, and current ratio is 2.15. This year's growth is estimated at 39.9%, which is good compared with the negative figures of previous quarters, and the projection for the next five years is a growth of 2.35% per annum. It might go up to $43. In terms of recent news on this company, Vale was mentioned in a list of oversold stocks, which were still profitable and had a good return on equity. Despite its volatility in the past quarter, it will gain more stability as it expects to invest about $19 billion in 2012. Yes, this is less than what it invested in 2011. It is also in the midst of changing management structure. It has the highest price/ earnings to growth in comparison with its competitors Cliffs Natural Resources CLF and BHP Billiton . It is, according to me, a stock to consider, given the disconnect between miners and metals prices.
As a word of advice, have faith in the stock market and the powers that be. There is an underlying foundation that will hold it all together and support everything. Don't get led astray by the wind's changing direction momentarily: if it did so once, it will do so again, this time, in your favor.