Overlooked opportunities in YWR’s QARV rankings
Why do China, shipping, iron ore, hardware, Brazil… all stand out if you screen high ROE’s with low valuation? Erik@YWR sees it as scepticism about global growth on which he is taking a contrarian view. Following this month’s review of YWR’s QARV rankings key themes include: 1) A massive China bull market has only just begun. 2) Opportunities in iron ore, where Fortescue, Rio Tinto and Kumba are delivering ~20% ROEs at <12x P/E despite China’s property crash. 3) The Taiwanese semiconductor supply chain stands out as highly profitable and undervalued. Everyone focuses on Nvidia and the datacentre buildout but misses the whole Taiwanese supply chain behind this. Tokyo Electron and ASML also screen well. 4) Brazil is overlooked, with names like Itau, Vale, Ambev and B3 all screening well. 5) Container shipping - supply-chain diversification could sustain tighter freight rates than investors expect.
Edition: 220
- 19 September, 2025
Is the diversified model dead?
Materials
GMR recently published a review of the leading mining stocks’ performance over the last five years. For the diversified miners this highlighted weak TSR and overall negative returns stripping out cash payouts. A critical issue facing the group, especially the iron ore-dominated miners, is how to restructure their portfolios for the long-term. GMR reviews six key questions: 1) Is the diversified model dead? 2) Can dividends be sustained? 3) Miners exited coal but should it have been iron ore? 4) Shrinking to greatness might have merit? 5) How to increase EV materials exposure & in which commodity? 6) Is M&A the answer? BHP is their preferred pick, with Glencore second. Vale is very cheap, but it is hard to see a catalyst.
Edition: 204
- 07 February, 2025
Materials
GMR examines how much Vale Base Metals is worth - this includes the former Inco assets predominantly in Canada, and two copper and one nickel mine in Brazil. They forecast attributable ~325kt copper and ~160kt nickel in 2023, with 30% growth long term. GMR estimates a value of $14bn or ~$3.00/share, based on DCFs, or 23% of the miner's M/Cap. However, with typical premiums Base Metals could see ~$4.00/share, representing a significant hidden option value. A partial sale would allow investors to see more clearly what the assets are worth, and by difference, see how cheaply the iron ore and pellet side of the business is trading (at 0.6x P/NPV10).
Edition: 163
- 23 June, 2023