Vale S.A. (VALE)

(Market Call Minute) Iron ore prices are down and he is uncertain what is going on with the Brazilian government.

Biggest product is Iron Ore so they are dependent on Chinese steel production. He sold because of a change of government in Brazil and their interventionist tendency. He owns BHP-N happily.

As an operating company, they've done everything right. The problem was that Brazil slapped a tax on some of the largest corporations to cover some of their deficit. There is an election in October. If you own, and if the incumbent gets in, you might want to rethink your position. Otherwise things could really turn.

A prime player in iron ore as well as a great presence in the nickel market. High leverage in iron ore means it is highly levered to the steel business and therefore to China. If you look at other large entities, they have restructured their businesses, and this company has not. You would be better off in a Rio Tinto (RIO-N) or BHP Billiton (BHP-N).

If you buy commodities out of favour you have to hold them much longer. He doesn’t really like this one. There is a lot of government interference. Prefers BHP.

Brazilian company tied to Iron Ore. Big conglomerate companies like this don’t exist in Canada. They understand return on capital for their shareholders. He owns BHP because he thinks it is a better company with broader resource base and better run. BHP also shut down a bunch of projects that didn’t work for them.

This is your prototypical basic materials company and, if you are of the belief that China is going to continue on the same pace that it used to be in terms of building highways, building buildings, etc., it is probably a good name to own. However, he does not think China is going to continue on that pace. This and other countries are shifting more from an infrastructure play to more of a consumer oriented area.

(Top Pick Dec 13/12, Down 27.39%) Money left the region as well as stocks that service Asia. It could be a double bottom here and then it could perk up, otherwise he will exit the stock.

Really levered to iron ore, which is really levered to the growth in steel and that, is effectively China. Iron ore prices have fallen and this stock fell a fair bit. These large mining organizations have a great opportunity. Have fallen a lot and look cheap on most fundamentals. If you see global growth happening, these kinds of companies will do well and you could see a decent return in the next little while. In the last little while they have gotten rid of poor assets and sold off businesses that they do not need. Not a bad price to get into these things.

(A Top Pick Nov 14/12. Down 14.48%.) Iron really didn’t get going but he thinks it will work this year. Has a good yield of between 5%-7%.

Very large Brazilian mining company and they are big in iron ore. As China slowed down, a lot of these big companies cut back on capital expenditure. Their cost structure has come down quite considerably and they continue to get rid of non-core assets. The average price on iron ore for them was about $1.09. Thinks iron ore prices are going to go a little bit higher. You want to see China picking up on steel production. Feels this has more room to run.Very large Brazilian mining company and they are big in iron ore. As China slowed down, a lot of these big companies cut back on capital expenditure. Their cost structure has come down quite considerably and they continue to get rid of non-core assets. The average price on iron ore for them was about $1.09. Thinks iron ore prices are going to go a little bit higher. You want to see China picking up on steel production. Feels this has more room to run.

Portfolio managers cut this because of China, but he disagreed. Demand comes out of Asia and not North America. Numbers out of China and India are looking quite good. Produces a lot in Brazil. Thinks they will do well as Asian economies continue to improve. Commodities tend to turn and stay. Copper is looking like it is going to do well.

Super cycle is over and this is a super cycle play. Expect you are in for a slow period of growth for the next couple of years.

Brazilian iron ore company which acquired Inco and is probably regressing considerably because it paid a top-of-the market price. A big mainstay of a lot of emerging-market portfolios. What you think Chinese demand for iron ore is going to be over the next 18 months, is what drives this stock. This demand has substantially diminished as growth is slowed from a .5%-9% to 7%-7.5%.

Would you Short this stock? In this sector, he feels that BHP Billiton (BHP-N) has the most attractive suite of assets. One of Vale’s challenges is not only that it is a base metals stock, but there is a view that it is coming more and more into friction with the Brazilian government over a tax and royalty dispute that has been ongoing for a long time. Doesn’t know if the stock is expensive enough to Short. There are other names that are more clear-cut in that space.