Long Vale into 10/17/14 Ex-Div
Historical trends from the past 2 years shows heavy buying with a ~10-15% run in Vale heading into Ex-Div. The stock price is trading around a multi-year low in the low 12s. It has tested this level and traded higher with strong support multiple times (Jul13, Jan14, Mar14, Jun14). At a current price of ~$12.4 the yield on the semi-annual 10/17/14 dividend will be roughly +3.3%. Fundamentally Vale is trading at a depressed multiple with a iron ore trading at a 5-Yr low. Morgan Stanley forecasts a rally in the final quarter which follows a similar prediction last week from Vale (VALE +0.8%), the world’s largest supplier, which said prices may be poised for a rebound to as much as 1100/TON by year-end because of declining inventory at ports (seekingalpha.com/news/1982925-iron-ore-rebound-seen-by-morgan-stanley-as-vale-sees-100-ton).
Update 9/15: Vale announces partnership with Cosco which will lead to lower shipping and overall costs in China. For two years, Vale SA's Valemax mega-ships - designed to cut the costs of transporting iron ore to China - have not been allowed to dock at Chinese ports, stalling the miner's $4 billion strategy. But the argument is now moot because Vale on Friday announced a deal with Cosco, and analysts forecast the Valemax ships will soon be docking in China. If they are right, it will mark a long-awaited breakthrough for Vale, allowing it to better compete with Australian rivals BHP Billiton Ltd and Rio Tinto Ltd (mobile.reuters.com/article/idUSKBN0HB00N20140916?irpc=932)
Update 9/16: Vale to Benefit From Tax Credit Given by Brazil’s Mantega. The government will give a tax credit of 9 percent of earnings abroad to all Brazilian industrial companies, including miners such as Vale SA. (bloomberg.com/news/2014-09-16/vale-to-benefit-from-tax-credit-announced-by-brazil-s-mantega.html)
***Investing/trading in Vale since 2013. Entered new long position at $12.6 and accumulated through the low of $12.10. Expecting to close the position in a couple weeks between $13.5 - $14. I might look to short Vale heading into earnings on 10/30 if between $14 - $14.5 in the middle of October. Short trade would be based on historical trend following the dividend payout/heading into ER, as well as the faster than anticipated decline in iron ore price this quarter.***
Update 9/15: Vale announces partnership with Cosco which will lead to lower shipping and overall costs in China. For two years, Vale SA's Valemax mega-ships - designed to cut the costs of transporting iron ore to China - have not been allowed to dock at Chinese ports, stalling the miner's $4 billion strategy. But the argument is now moot because Vale on Friday announced a deal with Cosco, and analysts forecast the Valemax ships will soon be docking in China. If they are right, it will mark a long-awaited breakthrough for Vale, allowing it to better compete with Australian rivals BHP Billiton Ltd and Rio Tinto Ltd (mobile.reuters.com/article/idUSKBN0HB00N20140916?irpc=932)
Update 9/16: Vale to Benefit From Tax Credit Given by Brazil’s Mantega. The government will give a tax credit of 9 percent of earnings abroad to all Brazilian industrial companies, including miners such as Vale SA. (bloomberg.com/news/2014-09-16/vale-to-benefit-from-tax-credit-announced-by-brazil-s-mantega.html)
***Investing/trading in Vale since 2013. Entered new long position at $12.6 and accumulated through the low of $12.10. Expecting to close the position in a couple weeks between $13.5 - $14. I might look to short Vale heading into earnings on 10/30 if between $14 - $14.5 in the middle of October. Short trade would be based on historical trend following the dividend payout/heading into ER, as well as the faster than anticipated decline in iron ore price this quarter.***
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