We recently published a list of 10 Oversold Value Stocks To Buy Right Now. In this article, we are going to take a look at where Vale S.A. (NYSE:VALE) stands against the other oversold value stocks.
After Trump’s victory in the presidential election, US stocks surged to record highs. Much of the stock market’s history reveals that value stocks have outperformed their growthier counterparts but the trend has reversed over the last decade. With mega-sized technology stocks especially those driven by AI dominating, the reverse trend intensified. It is important to consider that the Morningstar US Large Growth Index has returned 258% and the Morningstar US Large Value Index has returned 148% in the last decade, reflecting a significant difference.
Growth stocks looked unstoppable until a week in July when the Morningstar growth index fell 3.97% while the value index climbed 3.39%. This was when the investors were confident about the interest rate cuts that were to be executed in the later part of the year. Thus, it looked like they shifted their focus from big tech to more underperforming sectors.
Over the next year, the outlook for value stocks looks bright as concluded by Bankrate’s quarterly Market Mavens Survey. The survey revealed that experts see value-priced equities outperforming over the next four quarters. 42% of respondents preferred value stocks to growth stock over the next year while 33% think returns will be about the same.
When leading investing professionals were asked whether value stocks or growth stocks would offer greater returns over the next year, they put forward different reasons for their preferences. While the view regarding value outperforming growth at the start of a rate-cutting cycle was noticed in the responses, one of the experts inclined towards value stocks by stating:
“If the Fed is cutting rates because the economy is faltering, market participants are apt to seek out the best growth opportunities in a weakening growth environment. However, if economic growth holds up and rates come down, value would be the place to be for the best return prospects.”
Others were of the opinion that falling inflation and interest rates would benefit both classes equally.
Aerial view of a giant iron ore mine, showcasing the mineral deposits of the company’s Ferrous Minerals segment.
Our Methodology
In order to compile a list of the 10 oversold value stocks to buy right now, we first used a stock screener to identify value stocks that have fallen by at least 30% year-to-date and are trading at a forward P/E ratio under 15, as of November 22. We focused on companies trading in industries including consumer staples, financials, legacy healthcare, industrials, and materials. Finally, we ranked the stocks in ascending order of their hedge fund holders, as of Q3 data.
At Insider Monkey we are obsessed with 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).
Vale S.A. (NYSE:VALE)
Year-to-Date Decline: 36.60%
Forward PE: 5.06
Number of Hedge Fund Holders: 41
Vale S.A. (NYSE:VALE) is a global company practicing sustainable mining and has a presence in 20 countries. It was founded in 1942 as Companhia Vale do Rio Doce. Since the first ore was extracted in Itabira, Minas Gerais, the firm started working in logistics, through its railroads, ports, and terminals, in energy and in steel making. Vale operates through segments including Iron Ore Solutions and Energy Transition Metals.
Vale pioneered the world as a global mining company. The firm serves as the largest producer of iron ore, pellets, and nickel while simultaneously having operations in manganese, ferroalloys, copper, gold, silver, and cobalt. Therefore, the firm’s core business is an essential activity for the world with iron ore, nickel, and copper used in everyday life. Additionally, the firm has created a logistics network that is part of mines, railroads, ships, and ports. Other than its products, Vale carries cargo to third parties and offers two passenger train lines in Brazil thereby serving as the largest exporter of mineral abroad.
During the third quarter, operational and sales performance improved across all business segments of Vale S.A. (NYSE:VALE). The firm’s iron ore production reached its highest levels in more than five years. While pellet production remains at peak since 2019, copper and nickel production is progressing well. Vale reported major business highlights, with the commissioning of the Vargem Grande 1 project’s wet processing operations started in September, completion of the joint venture transaction with Apollo, and mechanical completion achieved by the second underground mine of the Voisey’s Bay Mine Extension project.
Hence, Vale S.A. (NYSE:VALE) has a strong foothold in mining alongside a solid logistics infrastructure integrating high-quality ore extraction and its transportation by ship, rail, and port to distribution centers. As of Q3, the stock is held by 41 hedge funds.
Overall, VALE ranks 4th on our list of oversold value stocks to buy right now. While we acknowledge the potential of VALE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.