I Know First Review: Vale S.A. (VALE)

I Know First Review

Vale S.A. (VALE)

Vale S.A. (VALE) is one of the largest companies in the world involved in the research, production, and sale of iron ore and pellets, nickel, fertilizer, copper, coal, manganese, ferroalloys, cobalt, platinum group metals, and precious metals. The company is based in Brazil but operates internationally.

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Brazil is in the throes of a political crisis and economic recession that has been drawn out for more than a year now. The economy continued to contract into the first fiscal quarter of 2016 by 0.3%. The Organisation for Economic Cooperation and Development (OECD) now expects this trend to continue and that the economy will ultimately shrink by 4.3% this year. Uncertainty in the current political situation in Brazil has only worsened the country’s economic outlook.

Rumors have started to circulate that Brazil’s acting government may move to oust Vale’s current CEO Murilo Ferreira. Ferreira was initially appointed to the position by President Dilma Rouseff who was suspended from her presidency last month while impeachment proceedings move forward. Former Vale executives have already been named as speculative replacements for Ferreira, but Brazil’s acting President Michel Temer has not confirmed any speculation surrounding the position.

Meanwhile, iron ore prices have been on the rise. As the lead driver of the global iron ore market, China’s new investments in infrastructure have had a substantial impact on the price of the commodity. After two years of slowed manufacturing output, Beijing is saying that aggressive steps will be taken to boost growth.

Although demand for iron ore has gone up in China in recent months, the supply seems to be moving faster than the growth that China is aiming for. Iron ore inventories in ports in China have surpassed 100 million tons for the first time in 2016, showing that the country isn’t able to absorb the commodity as quickly as it is being produced and supplied. The slowly increasing stockpile of iron ore may cause the commodity’s prices to stumble and will likely hurt suppliers like Vale.

Vale S.A. has seen strong growth since the start of 2016, following the price of iron ore for the most part. Though, VALE stock prices saw less growth than competitors in the iron ore industry due to the diversity of the company’s offerings. While iron ore prices were rising, nutrients were dipping. Despite the wide range of product offerings coming from Vale S.A., historically, the stock’s price has more or less followed the trend of iron ore prices.

The algorithm is currently bullish on VALE stock for the short, mid, and long-term ranges. In this forecast from June 3rd, the algorithm gave VALE and bullish signal of 10.88 and a predictability of 0.17. At the end of the 3-day forecasting period, the stock had seen growth of 17.59%, contributing to an excellent 3-day forecast from the algorithm.

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