A Brazilian Commodities Play On Asia

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

CVRD holds exploration claims that cover 8.7 million hectares in Brazil, as well as 9.8 million hectares in Angola, Argentina, Australia, Chile, Gabon, Guinea, Mongolia, Mozambique, Peru, and South Africa. With approximately 7,981 million tons of proven and probable iron ore reserves, CVRD is the world’s number one seaborne supplier of iron ore.

Here’s why we believe that CVRD will continue to be the strongest-performing diversified commodities play in global markets over the coming months.

First, thanks to relentless demand from Asia, CVRD has no problem in selling all the ore that it can produce. With China growing at 9-10% per year, demand for steel — and the iron ore that CVRD produces — will continue to leap ahead as far as the eye can see. In 2005, CVRD produced 234 million tons of iron ore, expanding to 271 million tons in 2006. That’s up 60% from the 2001 total. And, thanks to China’s demand, prices are rising as well. Sinter feed iron ore prices have climbed 162% since 2003 — and they are expected to continue rising.

Second, CVRD’s financials have been solid and are only improving. CVRD reported earnings of 90 cents per share in the recent quarter — a 33% gain from a year ago. And the current quarter’s earnings — scheduled to be announced on May 3rd — are expected to jump a whopping 121%. Trading at a P/E of 15 and with annual EPS growth of more than 66%, CVRD’s stock is a bargain.

Third, CVRD is a pure commodity play and should move in lockstep with the price of its underlying commodities. These are headed in the right direction, with prices for nickel alone rising 46.75% just this year. As a result, investment bank Goldman Sachs last week upgraded CVRD to a "buy" based on increased demand for iron ore and nickel. The investment bank also put a target price of $50 on the stock that is more than 25% above CVRD’s recent closing price.

Exclusive  Global Markets Steady as Dubai Tumbles

So buy CVRD (ticker: RIO) at market today and place your initial stop at $33.00. For potentially even bigger upside, I recommend the June $40 call options (RIO-FH).

PORTFOLIO UPDATE

Five of six positions in our Global Bull Market Alert portfolio are profitable. Global cell phone play Millicom (MICC) is up 109%. Move your stop to $70.00 to lock in some of your profits. Korean Steelmaker Posco (PKX) is up 7.3% in just two weeks, while its options are up 38%. Move your stop to $92.00. Latin American cell phone play NII Holdings (NIHD) is up 5.59%. Move your stop to $68.50.

All of our current recommendations remain buys at these levels.

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE


img
previous article

Stocks surged yesterday on signs of resilience in the housing market and the U.S. consumer, as well as falling oil prices. The Dow Jones Industrial Average reached a five-week high, rising 128.00 points to 12,510.30 -- its highest close since Feb. 26. The Dow now is back in positive territory for the year and 276 points below its record close of 12,786.64, reached Feb. 20. Markets in Asia also were up across the board overnight. Mr. Market is emerging from his emotional funk.

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Mike Turner

Mike Turner’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details

LEARN MORE HERE

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE