As you might have figured out, I try to avoid making specific stock recommendations in your Mining Memo updates.
I reserve those for my paid readership group!
However, occasionally, I share an investment idea, like this one from early March: Fortescue Metals [ASX: FMG].
At the time, this company was being ‘trash-talked’ by the mainstream media.
For investors unable to look beyond the narrative that China’s economy faced imminent doom, investing in iron ore miners was a dog of an idea!
But this is what I wrote about the opportunity for Australia’s largest pure-play iron ore miner, Fortescue Metals, earlier in the year:
This $52 billion major is not a speculative resource play, but given the company’s price action over the last 12 months, it may as well be!
After topping out in February 2024, this iron ore major plummeted over 45% last year and has continued to troll multi-year lows.
While FMG did have a spark of optimism earlier in the year, those gains evaporated after its woeful earnings report last month.
First-half profit plunged by 53 per cent, forcing Fortescue to slice its dividend payout by more than 50 per cent.
But despite the pessimism and earnings drop, Fortescue is still hovering just above its major low from mid-2024:
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| Source: Trading View |
That trough marked a period of peak pessimism in China’s economic outlook, which offers a clear line in the sand for FMG investors.
A break below signals major price weakness, but if FMG consolidates around these levels, that could offer a foundation for a recovery.
So, what’s happened to FMG shares?
The company has rallied about 20%.
Not bad, given that this is a $60 billion titan, one of Australia’s largest companies.
However, the key thing I was trying to demonstrate here is that the market prices in events well before they happen.
The mainstream sentiment for iron ore miners has improved markedly since I wrote that piece.
So does that mean you should buy FMG now?
Well, I just read a piece in Reuters detailing why it thinks Chinese iron ore imports are expected to remain strong throughout 2025 and 2026.
According to them, this will keep prices robust.
A casual observer might think that’s a solid reason to finally look at iron ore stocks.
But remember, this was the same news outlet proposing iron ore’s demise earlier in the year—precisely the time you should have invested in FMG!
When it’s in the news, it’s in the price.
And that’s why I would be far more hesitant about buying FMG stocks right now. That window has closed.
But there’s still plenty of OTHER contrarian ideas in the resource market, waiting to shine.
Again that’s reserved for my paid readership group.
Contrarian investments deliver real results.
Here’s some examples…
Last Thursday, we closed our position on the mining service play Perenti [ASX: PRN]. Locking in a 65% gain in 7 months.
We entered that when conditions were sluggish for mining service stocks.
Last week, I also instructed my readers to sell HALF of their position in two other resource companies.
One of those mined a specific type of critical mineral… We locked in a 70% gain in three months.
The other was a copper-gold explorer, where we cut half of our position for an average gain of 195%.
If this is the type of investment strategy that meshes with you, I suggest checking out some of my latest ideas here.
There’s still plenty of contrarian opportunities left in the resource market. In fact, this market remains overwhelmingly bearish.
And that’s ideal once you can re-wire your investment strategy to this type of thinking.
But if you prefer to follow news headlines and invest in trendy stock ideas, I suggest looking elsewhere!
Until next time.
Regards,
James Cooper,
Mining: Phase One and Diggers and Drillers
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