Moreover, BHP Billiton Limited (NYSE:BHP) has a competitive advantage based on its diversified portfolio of low cost and high quality assets. This may help the company derive profits from industrial and infrastructural transition across the world. Also, the company has been looking to divest non-performing assets to strengthen its balance sheet. In the half year 2013, the company divested roughly $4.3 billion of its assets.
Hedge fund trade
Going into 2013, Vale had the most hedge fund interest among the iron ore companies, with a total of 25 hedge funds long the stock, a 14% decrease from the previous quarter. The largest hedge fund owner was billionaire Jim Simons, with a $83 million position in the stock, comprising 0.2% of its 13F portfolio (check out Simons’ high yield picks).
In a close second was Cliffs Natural Resources Inc (NYSE:CLF), with 23 hedge funds long the stock. The top hedge fund owner was billionaire Steve Cohen’s SAC Capital with a $116 million position (see Cohen’s top five).
Coming in third, with only 14 hedge funds long the stock (a 30% decrease from 3Q 2012), was BHP Billiton Limited (NYSE:BHP). The top hedge fund owner by market value was billionaire Ken Fisher’s Fisher Asset Management, with a $529 million position that made up 1.5% of its 13F portfolio (check out Fisher’s cheap stock picks).
Don’t be fooled
The iron ore industry is tough to own right now thanks to the poor macroeconomic environment. The weakness in iron ore going forward will be driven by excess steel capacity, coupled with a slowing of nonresidential construction.
However, there are balancing factors on the positive side. These include an expected rise in U.S. GDP (S&P expects 2.7% growth in 2013) and an increase in auto sales, with S&P expecting sales to be 15.6 million units in 2013, up from 14.4 million in 2012. I remain cautiously optimistic about the industry, but for investors looking to gain some exposure to iron ore, their best bet looks to be BHP Billiton Limited (NYSE:BHP), based on its valuation and its solid dividend.
The article Cliffs Still Has a Long Way to Climb originally appeared on Fool.com.
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