Vale SA (ADR) (VALE), BHP Billiton Limited (ADR) (BHP), Rio Tinto plc (ADR) (RIO): Positives Continue to Outweigh Negatives With This Value Play

Strength in numbers
Through this downturn in the iron and coal markets, Vale has been able to maintain a rock solid balance sheet that should only improve once global markets get their acts together. While the debt level compared to EBITDA has crept up in recent quarters, I believe that the latest margin expansion should quell some investor concern. Another reason to wipe any sweat from your brow is the company’s current ratio (current assets – current liabilities) which stood at two times during the first quarter of 2013. So clearly, near-term solvency is not an issue.

Turning to arguably the most important financial statement – the statement of cash flows – I was quick to notice that Vale’s cash generated by its operations had proven ample enough to cover its dividend payments and a significant portion of its capital expenditures for four of the past five years (I’m sure we can all forgive them for a dip in performance in 2009). For the remainder, debt has been issued but only to the tune of 30% of its total capital. For even great comfort, only 23% is due within the next five years.

Money where my mouth is
Based on this analysis, along with more that didn’t make it into this article, I have chosen Vale S.A. to begin my Motley Fool Real Money Portfolio. Value, diversification, income generation, financial strength, and personal opinion about market dynamics have all led me to this point. In hopes of beating the S&P 500, along with a friendly competition among fellow Real Money Portfolio managers, I believe this pick will prove more than worthwhile over the long term.

Fool on!

The article Positives Continue to Outweigh Negatives With This Value Play originally appeared on Fool.com.

Taylor Muckerman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.