Tag: Relative Value
With a view to informing the readers of this blog of value (and sometimes, ‘deep value’) investment opportunities on a regular basis, I am launching this blog-stream that will offer up a few specific investment ideas.
Before I get into specific names, let me define ‘value’ as I see it. There are certain metrics which — either in combination or on their own – will qualify specific investments as deep value in my view:
1. P-E Ratio: Any equity trading less than P-E ratio of 10 or less.
2. 52-Week Trading Range: Any equity that trades within 25% of its 52-week low (in combination with the other metrics).
3. Dividend Yield: Any company that offers a Dividend Yield of more than 3% (in combination with the other metrics).
4. Positive Cashflow Entity’s Negative Event-driven Moves: Any cashflow positive company with net margins of 10% or more whose equity has seen more than a 20% price reversal within a week (in combination with the other metrics). Such equities are particularly well-suited for tactical, opportunistic, event-driven ’snap-back’ trades.
Now that we’ve defined ‘value,’ let us move on to the first edition of ‘value’ recommendations. In this edition, I would like to cover a few mining stories:
1. Vale (NYSE: VALE):
- The world’s largest iron ore producer trades at a modest P-E multiple of less than 6.0
- This Brazilian miner offers a generous dividend yield of 5.1%
- The stock is currently trading roughly 15% above its 52-week lows
2. Anglo American (PINK: AAUKY)
- This large, diversified global miner trades at a P-E multiple of a little over 7.5
- It trades within roughly 20% of its 52-week lows
3. Cliffs Natural Resources (NYSE: CLF)
- This American-headquartered miner trades on a multiple that is a little over 6.0
- It offers a healthy dividend yield of 3.5%
4. Barrick Gold (NYSE: ABX)
- The world’s largest gold producer trades on P-E of just over 9.0
- The stock is trading within 5% of its 52-week lows
5. BHP Billiton – ADR (NYSE: BHP / NYSE: BBL)
- The world’s largest miner trades both its ADR’s on NYSE below P-E multiples of 8.5
- Both of the company’s ADR’s provide a dividend yield higher 3%
In the coming weeks and months, more such ‘deep value’ investing ideas are to follow.