Three reasons to like Vale, Bernstein analysts say


Vale (VALE) is an attractive mining investment as the cheapest of the three largest global iron ore producers, which include Rio Tinto (RIO) and BHP Billiton (BHP), Bernstein said in a report out today.

Three reasons to like Vale, according to the Bernstein analysts: Shares are cheap at 4x 2014 EBITDA vs. 5.7 for RIO and 6.7 for BHP; pellets likely will gain more traction in the pollution conscious world, and 15% of Vale’s iron ore output is sold as pellets; and Vale's Zambia mine is expected to reach full capacity by 2015, giving the company a foothold in one of the world’s best new frontiers for copper production.

The Bernstein bunch says they prefer Rio as the way to play iron ore, but Vale has leverage to nickel price appreciation.

From other sites
Comments (7)
  • mapodga
    , contributor
    Comments (7342) | Send Message
     
    I have all three. Now are cheap. i alrrady earned 10% and will go up.
    7 Jul 2014, 05:53 PM Reply Like
  • robin steel
    , contributor
    Comments (151) | Send Message
     
    and Rio has leverage to gold...nickel is nice but gold is nicer
    7 Jul 2014, 07:13 PM Reply Like
  • wilson rodrigues
    , contributor
    Comments (13) | Send Message
     
    DO YOU REALLY BELIEVE IN VALE........

     

    IT´S NOT A NICE PRICE UNDER MEDIUM PRICE I THINK
    7 Jul 2014, 11:23 PM Reply Like
  • graham downunder
    , contributor
    Comments (237) | Send Message
     
    Iron ore is in abundance ,so be careful as it depends on stockpiles and how much Chinese steel mill are prepared to pay. BHP is a safer bet as it has far more other things it mines . Remember RIO told us a few weeks ago is going to open a $20 BILLIOn mine in Guinea . The Australian companies ( BHP ,RIO, Fortescue ,etc ) can squash Vale anytime by simply turning up production . The world only needs so much steel, therefore Iron ore, the Chinese know that and have long term contracts in place. So we are only talking about a small percentage of the market that could switch to Vale .Meanwhile RIO has discounted some of its lower grade iron ore as it has too big a stockpile . As for Copper similar situation applies . The big boys play tough and can gang up anytime to suit themselves . Do an overlay chart of Vale and BHP you will see BHP is up 25% vale about 10 % but both are below their highs in November which was around 30% up from August last year . Look at Vale options for January 2016 strike price of $10 sell for around $4.05 so for a total of $14.05 compared to Todays price of $13.90 . This say a LOT as the market place sees no rise in the next 500 odd days as they attach NO premium for the long term option . buyer beware IMO
    8 Jul 2014, 05:37 AM Reply Like
  • justinturner
    , contributor
    Comments (6) | Send Message
     
    "Look at Vale options for January 2016 strike price of $10 sell for around $4.05 so for a total of $14.05 compared to Todays price of $13.90 . This say a LOT as the market place sees no rise in the next 500 odd days as they attach NO premium for the long term option . buyer beware IMO"

     

    That is not at all the reason why. They pay very high dividends, dividends lower call values. If you add in all the dividends payable to 2016 (that basically lower the price each and every time they are paid) you can easily see that it is pretty amazing there is still 15 cents of time value. I have personally traded in and out of the Jan 2016 options and it has been the case throughout 2013 till now. Options prices are pure mathematics with a very small component of supply and demand which can creep in (but it is a negligible amount).

     

    I also do not know how the Australian companies can crush Vale by turning up production since their cost is about the same as the Australian miners.

     

    I have been trading Vale in the 13-15 range for about 1 year and have done well, I really like the company but the macro picture has me a bit concerned. None of these names are cheap if things get worse. Of the three Vale will most likely earn you the most going forward. It has priced in most of the bad news and the added political risk, so in a flat to down market you will most likely do better due to Vale's dividend. If things go well and Iron Ore rebounds to the 120 range you will do better as Vale could be over 20 bucks in that scenario, where as you are probably looking at a 15-25% rally for the other two as they really aren't undervalued at this point.
    8 Jul 2014, 10:25 AM Reply Like
  • justinturner
    , contributor
    Comments (6) | Send Message
     
    As an added proof, take a look at your beloved RIO's Jan 2016 $$40 strike (which is equivalent proportionaly to the $10 Vale strike. It has a bid/ask of 16.00/16.90. It has no time value, maybe even less than Vale's (it is hard to tell the true price due to the big bid/ask spread) and they don't even have the same high dividend as Vale does.

     

    Therefore "NO premium for the long term option . buyer beware IMO"
    8 Jul 2014, 10:36 AM Reply Like
  • bernie 1
    , contributor
    Comments (673) | Send Message
     
    I liked Vale as long ago as $26.44 when I read & listened to the guru's talk in pearls. I still have this jewel because I believe (& I didn't need the cash). Do you all think,wait for it------------AVERAGE DOWN ? Then my little pearl will turn into a gold mine !
    8 Jul 2014, 08:42 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs