Vale (NYSE: VALE ), the Brazil stock that focuses on metals and mining, is not
exactly a sexy pick right now. If you like materials stocks, most investors
typically go for gold or maybe silver. If you like emerging market stocks, most
investors are looking to Asia. If you like stocks that feed the industrial
sector well, most investors think you are crazy. But investors should take
notice of Vale right now. The stock is showing tremendous growth over the long
term, pays a plump dividend (though an admittedly volatile one that fluctuates
quarter to quarter) and could be your best bargain buy in a market that feels
painfully overbought. I recently talked up the prospect of buying Alcoa (NYSE:
AA ) for similar reasons, citing Alcoa stock as a great bargain buy . But Vale
is even more attractive being 10 times the size, paying a bigger dividend and
having a footprint in emerging markets. The short term might be rocky, but
here's why I really think Vale could be a blockbuster investment for the long
term: Metal Prices Firming Up Yes, industrial demand remains weak. That's not
exactly news to anyone since manufacturing is stagnant amid a global economic
downturn and the housing market crash has put a big damper on the needs for
plumbing, wiring and other materials that use base metals. Click to Enlarge But
a look at copper and aluminum price charts hardly show that it is the worst of
times. While prices haven't regained to pre-recession levels which is no
surprise they have come storming back during the past three years from
financial crisis lows. Consider these charts, which show copper is up almost
four times over from its lows, and aluminum is about double 2009 levels.
Granted, there has been a softening in the past few months but the overall
trend continues to be up for the long term. I suppose car sales and home sales
will slump even lower than the "new normal," but frankly, if you believe
that, you shouldn't be investing in any stocks for the long term. The fact is
that manufacturing has almost nowhere to go but up if the American economy is
going to build a true recovery in the next year or two.
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