I am a self-funded retiree. BHP and RIO are considered blue chip stocks for long term investment. Their share prices are boosted by the temporary high demand and high price for iron ore. Should I take the profits now and buy again at the next good opportunity?
A: BHP and Rio are well run companies and will always be part of my “core portfolio”
I wouldn’t be over-weight these stocks because it was inevitable that Vale would lift production and some supply/demand balance would return to the iron ore market. But this is largely factored in, with most analysts forecasting materially lower long term iron ore prices (around US$80 per tonne) compared to the current spot price of US$114 per tonne.
According to FN Arena, current broker targets and recommendations are: BHP, 4 buys/3 neutrals/0 sell, target price $40.54 (implying about 9.1% upside); RIO 3 buys/3 neutrals/1 sell, target price $106.77 (implying about 9.6% upside).
This is all said, one of my observations is that no one (analyst, commentator, company CEO) is consistently good at predicting the iron ore price.
So, unless I think BHP or RIO are in “super cheap” territory, I just play these stocks around index weight. I go overweight when the market really hates them, and take some profits when the market “cant get enough of them”. I would say at the moment that are pretty neutral – just going with the market’s ups and downs.