10 Best Australian Stocks To Buy According to Hedge Funds

3. Rio Tinto  (NYSE:RIO)  

Number of Hedge Fund Holders: 29  

Market Capitalization as of August 30: $79.31 Billion

Rio Tinto (NYSE:RIO) is a global mining group specializing in the extraction and production of minerals and metals. The company business model is well-diversified across various segments, reducing dependency on any single commodity. Rio Tinto  (NYSE:RIO) operates in over 35 countries and produces iron ore, copper, aluminum, critical minerals, and other materials essential for the global energy transition.

In the first half of 2024, iron ore was the major revenue driver for Rio Tinto (NYSE:RIO) and accounted for 53% of its total revenue, the company’s diversification into aluminum and copper represents 37% of its revenue. This diversification mitigates risks associated with iron ore price fluctuations and allows the company to leverage growth opportunities in other metals, particularly as demand for aluminum and copper is set to increase significantly. According to a report by the World Bank, aluminum and copper prices are forecasted to increase modestly by 2% and 4%, respectively by 2025.

According to Forbes, the demand for aluminum is expected to grow by 50% by 2050 driven by the rise of electric vehicles (EVs) and renewable energy infrastructure. Copper demand is forecasted to increase by 75% by 2050. The company’s Resolution project in Arizona can produce as much as 40 billion pounds of copper over 40 years. Rio Tinto’s (NYSE:RIO) key projects, such as the Oyu Tolgoi underground copper mine in Mongolia, the La Granja copper project in Peru, and the AP60 aluminum smelter expansion in Canada, are expected to enhance the company’s production capabilities and positions it well to capitalize on the growing demand and offers reliable revenue streams in the coming years. Economic growth in regions such as India is also expected to contribute to iron ore demand.

Despite short-term challenges, including declining iron ore prices, Rio Tinto’s (NYSE:RIO) strategic diversification and favorable long-term demand for metals, make it a compelling investment opportunity for those looking to capitalize on future growth in the mining sector. Rio Tinto (NYSE:RIO) is trading 8.59 times its earnings, which is a 46% discount compared to the sector median of 15.91. In the second quarter, Rio Tinto’s (NYSE:RIO) stock was held by 29 hedge funds with stakes worth $1.29 billion. Fisher Asset Management is the largest shareholder in the company with a stake worth $1.12 billion as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $81.88, which represents a 25.64% upside potential from its current level.