VALE trade ideas
$VALEPotential SHARK notes on chart. The A-C relationship can go as low as 1.618 (which Is not noted here. Tight stop if trying long - around 12.75
Long term value investmentVALE should be valued between $18 and $25 dollars. Standard & Poors seem to hit it right on the head with a price target of $22. The company has a strong competitive advantage versus peers, however lacks diversification compared to the industry leader, BHP.
The market has priced in multiple risks associated with VALE:
Taxation: Corporate taxes are 34%, with double taxation on outside factors.
Emerging Market: VALE is located in Brazil, and is therefore is a target of bias. Inflation remains around 5-6%.
Volatility: EPS and revenues are volatile due to supply/demand of commodities, and overall pricing (i.e. China). However iron ore prices are unlikely to drop below $90 for an extended period of time.
Summary: VALE will continue to remain an industry leader. Their break-even for iron ore is $75 against the $100+ price. I created a position at $12.40 (50k) on Friday and will grow my position provided the broader market experiences enhanced selling or a correction. Short term fears could also drop their market cap closer to $60 billion, which would be a steal. Price target of $18 min, $24 max (time interval is 1-2 years).
Deep value play with VALEHigh capex is covering up current free cash flow, therefore the 6% dividend yield is safe for yield-seekers. The company has also beat top line analyst estimates for the year by a decent margin, as well as the bottom line. In the last ER, they missed on EPS due to continued increased expenses (via expansion projects), where we saw a dip in share price (likely corresponding to continued short term nervousness). Iron ore prices have stayed between $100-185 for the last 4 years, and should not plummet significantly as the global economy continues to recover. Analysts, however, are concerned about slowing infrastructure, but GS contends that construction will stabilize, especially in China (VALE's primary source of revenue). Brazil taxation issues are also being settled, and losses are finally being cleared out of the way. With that said, VALE should reflect stronger earnings power going forward and this comparative industry discount gap should close relatively soon. MS and JPM have also boosted their price closer to $17, while Standard & Poors maintains their $22 target. Holding a position at $13, I am issuing a risk/reward of 1:2, with virtually no downside for the long term holder.
Setup for advance.Nice entry here. Engage positon, stop -5 percent and ride to adx reversal on upside. target 17-17.25.
August 22.....move in place see present bars on chart. Target higher statistical validity at this point. Watch for DMI cross and adx reversal for confirmation. Nice medium to long holding. Nov 8 2013 Still in uptrend. Volatile during currency and ore instability. Company still focused and efficient. Hold.
