The Rising Influence of Rising Affluence

[DewDiligence]

Barron’s Roundtable plug for VALE:

Vale is the world's dominant producer of iron ore, which accounts for 76% of revenue. It has a $187 billion market cap. It also produces nickel, copper, alumina and fertilizer. It is a Brazilian company but trades in New York. The company likely had revenue of $43.2 billion in 2010. Iron ore prices could rise 25% this year, lifting revenue by 30%, which translates to $4.40 a share, or 7.9 times earnings. Net debt to equity is 0.2. The company has a huge expansion in the works. Iron-ore tonnage could rise from 311 million metric tons this year to 522 million in 2015. It is driven, to a large extent, by China. Vale generates a 28% return on equity. It will spend $24 billion this year on capex [capital expenditures], and do it all through internally generated cash flow. The company will generate $500 million to $1 billion in free cash. This isn't just a good company. It's a great company… The multiple could rise to 10 or 11 times earnings, and the stock could sell at 45 or 50.

The above comes from the section of the Barron’s Roundtable on the stock picks by Scott Black. See #msg-58842662 for the economic- and market-overview section of the Roundtable.