Rio Tinto (RIO)

If it's grown to an outsized position, wise to take some money off the table at this point.

Since 2022, it's been sideways and slightly slower, but recently had made a big run up. He expects this to fall back to $70-75 which will be attractive. It's in a very cyclical industry. No commodity is a long-term buy and hold.

Copper, aluminum, iron ore. AI data centres and electrification will be huge drivers. Growth rate of data centres is off the charts, and the "picks and shovels" will benefit from that capex spending. Onshoring and nearshoring are increasing. Lots of long-life resource deposits. 

HQ is in the UK. Mining is around the world, with a lot in Australia. Yield is 5.53%.

Hard to comment on rumours of takeovers. So let's go back to looking at the chart -- was in a longer-term downtrend, but broke out in middle of last year and has now broken out to new highs. Took out high from late 2023 and it's still going. Copper hit a new all-time high this week. 

Is definitely cyclical, but can own this long term. Trade this. Would definitely own this. Commodity prices keep going higher and returns are improving. A diversified miner in gold, silver, copper and aluminum.

RIO has had a great run. When buying a commodity stock, ask if you like the commodity? Are you paying a reasonable valuation? Sometimes you don't buy on a very low PE and sometimes buy when the PE is very high when the earnings are bad. 

Background premise is that we've entered a structural bull market for commodity prices. For 15 years, no one invested in new capacity and so there's scarcity. The most important thing we're hedging against is inflation. For a metals producer, as costs go up they put their prices up.

Global dynamo, going through its own catalyst transition toward energy-transition metals like copper, lithium, and aluminum. Those things have fairly inelastic demand, given the growth in demand. If earnings double, then the multiple can double, and dividends can double. That adds up to a lot. History of paying large special dividends. Well diversified. Technically, looks very strong having broken out of a multi-year base. Yield is 3.79%.

Likes materials, likes copper. Significant iron ore component (close to 60%), and iron ore hasn't been as strong. Asia is getting better, and China is strengthening. So that's positive. Long-term chart is very attractive. Trading below 200-week MA, he'd like to see it break out; if it can trade north of $65, thinks it would. Solid dividends and special dividends. Big cashflow. Might be just a bit early.

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Trades at 9x PE, pays a 6% yield, and a new CEO by year's end could unlock value.