Vale: Get Paid To Wait For Headwinds To Turn Into Tailwinds
Brazil's Largest Iron Ore Producer Is Dirt Cheap & Things Could Be Lining Up For Investors In 2025
Summary
Brazil has a Presidential Election set for the second half of 2026, and I wouldn’t be surprised if Lula is replaced with a more business friendly President.
Vale’s valuation is dirt cheap no matter how you slice it.
The Brazilian real is just starting to come off all time lows versus the dollar in the last month, and I’m leaning towards the real continuing to strengthen in 2025.
Iron ore prices and the outlook for the Chinese economy are two other factors to consider when it comes to Vale.
Investors get paid handsomely to wait, with a dividend that will likely be over 10% over the next twelve months.
For the investors that are willing to venture outside of the US markets for opportunities, there are still opportunities that are cheap for anyone willing to look. Vale VALE 0.00%↑, Brazil’s largest iron ore producer, is trading a couple bucks above the COVID bottom, and is down roughly 30% over the last year. Two days after Trump started slinging tariffs around seemed like a good time to write about it, but I think the valuation today is very cheap, and investors should get paid handsomely to wait for some of the current headwinds to turn into tailwinds. If you think the Chinese economy isn’t on the verge of a Great Depression, and we could see some positive political changes in Brazil over the next couple years, I think Vale is worth a closer look.
Political Changes On The Horizon
There are ways to get exposure to Argentina without chasing the price performance of the last couple years, but I think Brazil and Colombia are interesting ponds to fish in if you think they will probably see political changes that will be positive for asset prices and inflows over the next couple years. The next Presidential Election in Brazil is in roughly a year and a half, in the fall of 2026, and President Lula’s approval ratings have continued to slide. As an aside, Lula went in for a brain surgery in December, and the Brazil ETF EWZ 0.00%↑ was up more than 3% on the day. When news that the surgery was successful came out, EWZ resumed its selloff. I don’t get too focused in on short term moves, but the point is that the market doesn’t seem to be a huge fan of Lula.
I think we might see something similar in Brazil and Colombia to what has happened in Argentina, IF you see positive political changes in the upcoming Presidential Elections. The Argentina ETF ARGT 0.00%↑ is up more than 60% in the last year (Milei was inaugurated just over a year ago in December 2023), and I’m still kicking myself for not buying YPF 0.00%↑.
has written about Brazil in detail, and while I don’t typically go for ETFs, you do get paid roughly 9% to wait there with EWZ. We will see how the political environment in Brazil changes, and if/when the market starts to price that in, but Brazilian assets are cheap today and Vale is no exception. If Brazil does start to see some inflows, Vale’s stock will get a nice chunk of that, but more on that later.
If I could sum up the bull case on Vale in one run-on sentence, it would sound something like this: sentiment on Brazilian equities is terrible, the Brazilian real is within spitting distance of all time lows but has been strong over the last month, they have a Presidential Election in 2026 with Lula’s approval rating continuing to decline, the valuation is very cheap, and you will probably get paid more than a 10% yield to wait.