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Strategies & Market Trends : Value Investing
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To: E_K_S who wrote (45204)10/31/2011 1:09:25 PM
From: Spekulatius1 Recommendation  Read Replies (3) of 78666
 
re VALE - iron ore prices are falling rapidly and the Chinese are re-negotiation existing contracts apparently. Steel stocks have been very weak and my guess is that iron ore producers are not far behind. in addition, the Brazil government has raised the iron ore royalty rate.

Earnings for Vale are in the process of being revised down, from 5.2$/share recently to 4.5$ now. I expect this trend to continue. i like that they own world class reserves with probably the lowest production cost but I don't like the underlying trends. I also noticed that Vale stock has underperformed most peers in the recent recovery bounce.

My first buy was at 29.1$ and was an mistake - my second buy was at 23$ and lowered my overall cost basis to 26.xx$. I feel good when i make a mistake and still exit without loss. My plan is to enter this name again around recent lows (<22$/share).

As for FWLT, i noticed that MDR had very poor results. I decided to exist before earnings to a avoid similar disaster. I felt that the risk/reward is not good ahead of earnings.

These are not really value calls, I admit - but with a stock market correlation of 0.86 what matters short term to be in or out, not so much what you buy. These stocks above area all high beta stocks and I felt i needed to reduce my risk exposure. I think i get entries again in these names with a better risk reward (although not necessarily lower prices).
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