Stockchase Opinions

Martin Hubbes, CFA Labrador Iron Ore Royalty LIF-T HOLD Feb 15, 2011

The challenge longer term is that there is lots of iron ore. There will be quite a bit of production coming on over the next several years because everyone is aware of the demand from China. Easy money has been made. Not a Sell as he thinks it will still do OK.
$72.510

Stock price when the opinion was issued

Financial Services
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COMMENT

He likes materials now and this is a materials stock. It's coming off its support level and has made a descending triangle (lower peaks in the past 2 years, but the low has been steady). This could, maybe, breakout. Looks okay. Could benefit if money rotates out of high-flying tech.

BUY

Owns this personally. Earnings and dividends are erratic, depending on the volatile price of iron ore. But once in a while they pay an amazing, special dividend. Pays a 5.6% dividend.

HOLD

They collect royalties on every ore mined in Labrador. So, if Rio Tinto expands volume, LIF makes money more. IF Rio expands, it's a capital project that'll take years. Now, you own LIF to collect their dividend.

HOLD

Has owned shares for a long time. Benefits from iron consumers who prefer substance of assets. Great for dividend investors. Would recommend holding. 

WAIT

It is an interesting asset on a long term basis. Iron Ore has not done well but this could improve. It is great long term value creation company. The dividend is variable. You can continue to hold but wait to buy.

TRADE

It is in an uptrend and now consolidating. The support level has become the resistance level. It is going sideways so swing traders could trade the swing which is the only way for a stock going sideways. He likes swing trading. Pays a high dividend and there is a reason for a stock having a high dividend.

PARTIAL BUY

They have a huge operation in eastern Canada. They have a royalty structure, like a toll road on iron production. With a slowdown in China, how much demand will there be for metals? He's not sure. Be careful. LIF is volatile, but long-term this is good and pays a gooD dividend. You can buy a partial position and average in.

COMMENT

They get a royalty on what's delivered so are tied to iron ore prices. Their dividend is tied to earnings and they just cut the dividend from $1.10 to $0.70 for a yield of 10%. It is an interesting stock because of the valuation - 10X Earnings, cash - $40 million, and exposure, but they need iron ore to get back on track and China to grow again.

HOLD

Would recommend holding for the long term. Good dividend yield. 

WEAK BUY

He'd consider owning. People are on the sidelines because iron ore is used to make steel, and tariffs have been slapped on. Tremendous compounder over 2 decades; high teens total shareholder return, mostly from dividends. Dividend is highly variable, though reliable, current yield is ~6.7%. To get a sense of the actual dividend, take a 10-year average, which puts it close to an 8% yield over time.

At 3x book value, trading below 5-year average of 3.4x. Long-life assets, tons of reserves, producing below capacity.