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JimVanMeerten (57.13)

I'm not buying Vale



August 27, 2011 – Comments (2) | RELATED TICKERS: VALE

Complete Article and Graphs

One of the most hyped stocks in the past year has been the Brazilian natural resources conglomerate Vale SA (VALE) traded as an ADR here in the US.  Most pundits pointed to the BRICs forecasts and noted that China and Brazil had the best growth prospects and since Vale was in Brazil and sent their raw materials to China this investment would be a no brainer.  Well I keep looking at the numbers and they don't seem to stack up for me.

Barchart technical indicators:

1 - 60% Barchart short term technical sell signal that is weakening

2 - Trend Spotter sell signal that is also weakening

3 - Trades below its 20, 50 and 100 day moving averages

4 - Recently lost 27.47% form its previous high

5 - Relative Strength Index is 39.01% and strenghtening

6 - Barchart computes a technical support level at 25.46

7 - Recently traded near 26.11 which is below its 50 day moving average of 29.82

Summary: I'm passing on recommending Vale SA (VALE) for a addition to my portfolio.  I realize that I'm not in agreement with most of the professional and individual investors.  I'm looking just straight at the numbers and I see sales and earnings only growing by less than 5%.  I like to see stocks growing sales and earnings by double digit forecasts.  The rate of growth in their 2 primary markets - Brazil and China seems to be slowing slightly.  The only bright spot is that the stock is selling at half the P/E ratio for the industry.  Sorry, but that's not enough for me' I'm passing on this one.

Jim Van Meerten is a Marketocracy Master

2 Comments – Post Your Own

#1) On August 27, 2011 at 3:16 PM, Bays (29.16) wrote:

For a long term buy, technical indicators don't mean much to me.

As for your sales and earnings growth rates, where do you get 5%??

I'm seeing 5 year annual averages of 18 and 16%, respectively.

With dividend growth of 25% over the last 5 years. 

I'm also seeing basically every margin and investment return higher than industry averages.  Every ratio below industry averages. 

Seems undervalued to me......

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#2) On August 29, 2011 at 9:39 AM, JimVanMeerten (57.13) wrote:

In the long run I might revisit it but not a pick for the next year

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