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Which Stocks Do Analysts Love amid Commodity Price Volatility?


Dec. 27 2018, Updated 2:25 p.m. ET

Iron ore’s roller-coaster ride

Iron ore prices have been on a roller-coaster ride in 2018. Prices reached a peak of $79 per ton in February only to slump to a low of $63 per ton in March and to take off again soon after that. In November, prices again came under pressure due to weaker steel margins in China due to oversupply concerns. More recently, iron ore prices again climbed on the back of reports that several Chinese cities had eased restrictions in the property market.

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While volatility in iron ore prices is expected to continue, near-term fundamentals don’t seem to be very appreciative of the price increases given the plentiful supply and pressure on the demand side of the equation driven by China’s domestic weakness as well as headwinds from the US-China (SPY) (FXI) trade war.

Read Why China Needs More Than a Trade War Truce to Buck the Slowdown for more on the drivers of iron ore and steel prices in China along with their outlooks.

Iron ore miners’ performances

The performances of iron ore miners have also been quite volatile in 2018. Among major miners, only Vale (VALE) and BHP (BHP) have given positive returns YTD (year-to-date).

Cleveland-Cliffs (CLF), on the other hand, has outperformed these miners, gaining 6.5% in the same period. The factors driving CLF include the dynamics in the domestic US (DIA) steel market, which have remained more or less strong in 2018.

Series overview

Changes in analysts’ estimates offer valuable insights into their market expectations. Thus, it’s useful for investors to track these changes. Investors might now want to know what the consensus is factoring in for iron ore miners going forward.

In this series, we’ll analyze this key question with respect to individual miners by looking at analysts’ ratings and earnings estimates. Continue to the next article for a closer look at BHP.


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