We recently compiled a list of the 10 Oversold Large Cap Stocks To Buy Now. In this article, we are going to take a look at where Vale S.A. (NYSE:VALE) stands against the other oversold large cap stocks.
The Fed recently reduced the funds rate by 50 basis points, a decision seen as daring by some analysts, though it has been largely embraced by the market and many experts. The market seems to be on an upward trajectory since the day of rate cuts as the S&P gained over 4.3% on October 14 and closed at another all-time high.
While there are some concerns, experts are quite optimistic that they won’t be of much significance as we discussed in our article about best-performing long-term stocks in 2024. Here is an excerpt from the article:
“Dominic Chu of CNBC expressed concerns about potential market overconfidence, given the calmness amid geopolitical risks, the upcoming U.S. presidential election, and consumer spending challenges. [Gunjan] Banerji acknowledged these risks but emphasized that much of the market’s optimism is tied to the Fed’s actions, with people reassured by the larger-than-expected rate cut.
Finally, Banerji pointed out a broadening of the market rally beyond the tech sector and mentioned the strong performances in sectors like energy and materials, and record highs from companies like Caterpillar and McDonald’s, which indicates a healthier, more diverse market rally.”
The Path Forward for Equities and AI
Noah Blackstein, Senior Portfolio Manager at Dynamic Funds recently joined CNBC’s ‘Squawk Box’ and showed optimism around the equity markets. He suggested that current highs may continue. He expects the Fed will implement two more rate cuts this year, which would help sustain market momentum. Despite some geopolitical uncertainties and election concerns, the broader expectation in the market since July, along with favorable banking and credit indicators, supports his positive outlook.
Blackstein believes the labor market’s strength may be overstated and noted that revisions to employment data are likely due to a low participation rate in recent surveys. He also argued that real interest rates are historically high and tight, which further suggests the need for more cuts.
Regarding the economy, Blackstein expects further rate reductions to avoid potential market volatility, especially in light of recent hurricane impacts on employment and retail sales. He highlighted that while real interest rates may seem moderate when compared to the last 20 years, they are still elevated in historical terms.
As the Fed steers the economy away from a potential recession, Blackstein views the next phase as an opportunity for long-term growth, especially in areas like family housing and AI. He believes AI will drive a productivity revolution and integrate data strategies into several sectors, which will ultimately lead to cost savings and revenue growth for corporations.
Our Methodology
To list 10 oversold large-cap stocks, we used a Finviz screener to extract stocks that have fallen significantly on a YTD basis and have a forward P/E ratio between 5x to 15x. After getting a list of 20 stocks, we narrowed it to the most widely held by institutional investors. Finally, the stocks were ranked in ascending order of their hedge fund sentiment which was taken from Insider Monkey’s Q2 database of 912 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of a giant iron ore mine, showcasing the mineral deposits of the company’s Ferrous Minerals segment.
Vale S.A. (NYSE:VALE)
Market Cap: $45.85 billion
FWD PE Ratio: 5.47
YTD Share Price Decline: ~21%
Number of Hedge Fund Holders: 34
Vale S.A. (NYSE:VALE) is a Brazilian multinational corporation and is the world’s largest producer of iron ore and nickel, with operations across 30 countries. The company also produces manganese, copper, bauxite, and other minerals, while also managing extensive logistics operations such as railroads, ports, and ships. The company also invests in renewable energy through hydroelectric plants.
Vale (NYSE:VALE) recently announced that it has achieved record iron ore output and increased its production forecasts for 2024. The company surpassed its previous record of Q4 2018 as iron ore production increased by 5% year-over-year to 91 million tons due to improved performance at key sites like S11D, Itabira, and Brucutu.
The company also ramped up pellet production by 13%, reaching 10.4 million tons. Sales of iron ore rose by 2%, totaling 81.8 million tons. Copper production grew by 5% to 85.9 thousand tons, driven by improved performance across all operations, despite a disruption at Salobo 3 in June. Ore processed at Salobo 1 and 2 was up 30% year-over-year due to strong mill performance.
Nickel production increased by 12%, reaching 47.1 thousand tons, largely due to better results from Sudbury and progress at the Voisey’s Bay underground mines.
Vale’s (NYSE:VALE) is also quite focused on technologies that drive sustainability in mining and metals. In September, Its venture capital initiative, Vale Ventures invested in Mantel, a Boston-based startup focused on developing a low-cost carbon capture technology using molten borates.
The technology aims to help decarbonize heavy industries, including mining and steel production. The investment, part of Mantel’s $30 million Series A round supports the creation of a demonstration plant capable of capturing 1,800 tons of CO2 annually.
Overall VALE ranks 5th on our list of the oversold large cap stocks to buy. While we acknowledge the potential of VALE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VALE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.