Vale SA (VALE:NYSE)
Price at Preparation: $11.80 (Apr 5th, 2024)
What they do
Vale SA (VALE:NYSE), formerly Companhia Vale do Rio Doce, is a Brazil-based metal and mining company which is primarily engaged in producing iron ore and nickel. The Company also produces iron ore pellets, copper, platinum group metals, gold, silver and cobalt. Vale is engaged in greenfield mineral exploration in five countries and operates logistics systems in Brazil and other regions of the world, including railroads, maritime terminals and ports, which are integrated with mining operations. In addition, Vale has distribution centers to support the delivery of iron ore worldwide with numerous subsidiaries, including Vale Logistica Uruguay SA, Vale Holdings BV, Vale Overseas Ltd. The Company’s operations abroad cover approximately 30 countries.
This week at Theta Bandits, we are bringing a stock to the forefront which is near it’s 52-week low with a bright 12-month average Price Target (PT) with a very nice dividend to help bolster returns to a portfolio. Today’s pick is Vale SA (VALE) – let’s dig in!
Opinion
Vale SA (VALE) is a versatile stock that can serve multiple purposes in a portfolio, from those wanting to hold and collect the dividend, which is a whopping 11.26% ($0.55 USD last paid on March 25th, 2024) yield while putting this together. Or is cyclical and can be traded for the price appreciation. Over the past 52 weeks, this stock has had a range from $11.73 – $16.60 (USD). Focussing on the cyclicality, if we look at analyst PT for the next 12-months, the range estimated is from a low of $16.00 USD (+35%) to a high of $20.00 USD (+69%) with an average of $17.56 USD (+48%). Putting both factors together, we have the potential for a real winner on our hands. As always, the stock market is never a sure thing, so we need to adjust the strategy to fit our personal risk profile.
Plan
Using the visual aid graph below, there are some highlighted areas. We can look at those and identify a potential plan. From the 52-week high we had a drop, consolidation (which can be seen by the relatively sideways action on the chart) and then a breakout. Currently we have broken down to the 52-week low range of the price action. If the pattern is truly cyclical, there is a high probability that the stock will again consolidate before breaking out for a move higher. Since the dividend is high, this means that we can expect a pullback and volatility around dividend payouts.
For price appreciation plays the resistance zones of $14.50, $15.24 and $16.05 (USD) look like spots to target for profit taking which is a nice move from current levels. Even though the 12-month PTs are above that range – do we really need to risk getting all the way there? (The answer to this depends on your personal risk tolerance). The one nice thing about having a dividend of this size is that even during down waves, we get paid to wait, so if the dividends can counteract a price drop the stock can be held and give the trade the time it needs to work for us.
For more content consider our Theta Bandits Discord community, a hub for traders to ask questions, share ideas and strategies like the approach above for various other tickers daily. Traders in this community could potentially attack positions using a variety of methods discussed in previous Top Pick Tuesdays.
RISKS
In the plan above we are looking for dividends as well as price appreciation. Make sure to plan your trade with-in your risk tolerance and give it the time required to be successful, while setting and updating limits to mitigate risk and set exit points for your position as necessary.
Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.
