When looking for a value investment in today's economy, investors should look no further than the metal mining sector. Down over 25% so far this year, metal mining companies may offer an attractive bargain option for the long term at current levels. Lower prices of iron ore, aluminum, zinc, copper, and coal have been driven by lower consumption by China and Europe as their economies struggle.
Metal reserves are stockpiling currently and diluting companies' earnings, however you have to wonder how low can they go. Two huge countries that will have an influence on the price of metals in the long run will be China and India. China and India both have massive populations and will continue to industrialize. As time goes on too, there will be a growing demand for metals as current mines begin to run low and a search for new mines begins.
Daytraders or those trying to make a quick penny should disregard this article because that's not what this is about. This article is more for long-term investors who are willing to wait for their investment to pay off. The following are metal companies that are worth taking a look at.
Cliffs Natural Resources Inc. (CLF) is an international mining and natural resources company. The company harvests metallurgical coal and iron ore and sells to steel producers. Currently the stock is trading around $42 a share, and has fallen about $40 from the 52-week high of $85. Cliff's dividend yields about 6%.
Alcoa Inc. (AA) is the world-leading producer of primary and fabricated aluminum. Alcoa is valued just below $9 a share and has a 52-week high of about $13 a share. Alcoa pays a 1.36% annual dividend.
Vale (VALE) is a Brazil-based metal mining company that mines iron ore, nickel, copper, aluminum and manganese. Vale trades around $19 a share and has a 52-week high around $28 a share. Vale's dividend yields 6.2% annually.
These are my favorite three metal companies, however I also think Rio Tinto (RIO), BHP Billiton (BBL), and Sterlite Industries India Limited (SLT) might be worth a look. All of these companies have identical charts because they're all hurt by falling metal prices. Further research should be done to deem which company has positioned itself the best for the future.
Disclosure: I am long CLF.