Not all of us are keen on speculating in small-cap stocks due to the risks they entail. The vast majority of people who do buy and sell stocks, however, do want to focus on this area of the market.
Over the years, I’ve determined that all stocks are speculative securities. Even large-cap (so-called blue chip) stocks fall into this category. Another thing I’ve determined is that it is just as easy to make money from mid- and large-cap stocks as it is from small- cap stocks.
Individual investors are often put off by larger companies, because their stock prices are not usually as low priced as those of smaller companies. Investors also think that they can’t get the same kind of returns with small-caps. In my experience, I’ve found that this simply isn’t the case.
You know from my past articles that I really like VCA Antech (NASDAQ/WOOF), Huron Consulting (NASDAQ/HURN), and Luxottica Group (NYSE/LUX). All three of these companies are distinguished wealth creators and they are most certainly not small-cap stocks.
I recently came across a very promising large-cap company that I think will do very well over the next several years. You already know about China’s appetite for growth and that global demand for steel is very strong right now. So why not consider one of the world’s best suppliers of iron ore and raw-metal materials?
Companhia Vale do Rio Doce (NYSE/RIO) is a global large-cap conglomerate that is focused on the metals and mining industry. Founded in 1942, this Brazilian company is one of the largest mining companies in the Americas. It is also one of the world’s largest producers and exporters of iron ore, pellets, and manganese and ferro alloys, which are all important raw materials used for making steel. The company is also one of the world’s lowest-cost producers of aluminum, nickel, and potash. To top it all off, the company is also the biggest logistics operator in Brazil, owning and operating three railroads and eight ports.
In its latest quarter, which was the third fiscal quarter of 2006, the company shipped 73.4 million tons of iron ore and pellets, as well as 291,000 tons of potash, generating record revenues of $5.1 billion. This was a 40% gain over the third quarter of 2005.
Net income in the company’s latest quarter set a new record at $1.9 billion, or $0.79 per share, which is up 44% from net income generated in the third quarter of 2005. Not bad for a large-cap company!
The Asian markets are now the biggest destination for most of the company’s products. China is currently the main driving force behind the company’s growth, representing 19% of its total revenues in the third quarter of 2006, as compared to 15.7% in the third quarter of 2005.
Companhia Vale do Rio Doce is currently worth approximately $80 billion on the stock market. This is not a small-cap stock. However, I think that this stock is going to do great over the next several years.
In the past four years, this stock has appreciated by 600%. Right now, I see no reason for why this trend won’t continue for Companhia Vale do Rio Doce.