Vale (RIO) Is Cramer's Top Brazilian Pick

Last night, on Jim Cramer's Mad Money, the President of Cramerica highlighted numerous reasons why his viewers should buy Vale, short for Companhia Vale do Rio Doce (NYSE: RIO). Vale has been a recent favorite of Cramer's and mentioned that if investors would have listened to his initial recommendation, they would now be sitting on a cool 10% gain.

Throughout this week, Cramer will be selecting several Brazilian stocks in an attempt to draw viewers to investments that will not be effected by the U.S. economy. Cramer said Brazil is one of his favorite emerging markets as the country doesn't care what the U.S. Fed does or neglects to do. On top of that, during periods of domestic economic concerns, foreign countries such as Brazil often pick up market share from us.

But back to Vale; Cramer began the segment by pointing out that Vale was down with the broader markets yesterday, despite being upgraded at Goldman Sachs before the market opened. Jim said that on a normal day, the stock would be surging as Goldman raised its investment rating to Buy and also raised its price target to $45, 50% higher than yesterday's price level. Cramer is convinced that Goldman was actually waiting for Vale's stock price to pullback slightly before it issued the Buy rating.

Next, Cramer listed reasons why he felt Goldman really likes the stock: Vale is currently the #1 producer of iron ore and #2 producer of nickel in the world, thanks to its, as Cramer puts its, "highly non-competitive" acquisition of Inco. Cramer notes that Goldman is expecting iron ore production to increase by 60% year-over-year, certainly making Vale a benefactor.

Besides iron ore and nickel, Cramer also likes Vale for its "metcoal" or metallurgical coal, which is "coal used to make steel, not the energy kind." Goldman expects production for this good to rise by more than 100% in the next several years. Cramer said there is no chance demand for these minerals will slow anytime soon: emerging countries, such as China, will not be able to stop consuming these goods no matter how much growth slows.

To finish the skit, Cramer points out that Vale is off 20% from its highs during a worldwide bull market in mining. Cramer called Vale a global play in the "scarcity of commodities" and consolidation within the industry. Cramer says Vale has its eyes on Xstrata as a possible acquisition and feels this could create downside pressure on the stock in the near-term, but for the long-term, this will only add to Vale's strengthening market position.

You May Also Be Interested In