NEW YORK ( TheStreet) -- I spoke to Joe Deaux on Tuesday about the recent turnaround in the stock prices of many of the miners. While I've been careful to stay away from these stocks for most of the last two years, the recent move of many of these stocks has me looking to buy a few shares of Vale (VALE), Freeport-McMoRan (FCX) and Rio Tinto (RIO).
Why am I starting to warm up to some of the worst-performing stocks in the S&P 500? A couple of reasons -- and only a few of them are fundamentally based.
I am aware of the always-moving target of Chinese GDP growth, always the key fundamental driver for the miners. I also know well the overproduction that has plagued the mining sector for the last few years, which sent the price of copper plummeting to close to $3 a pound and gold to see multi-year lows of under $1,200 an ounce.
But sometimes trades pop out at you because they have been so bad. There are real industrial values to miners in a global economy that is improving, and Europe will, I think, hold the key to this. It's not that the miners are any less reliant upon the emerging markets, it's just that the stocks have become entirely too cheap for a business that's very clearly not on the verge of going out of business.In a market that is making new highs, you are always tempted to find the underperformers and make a case for them, and I will admit that is one reason I am now trying to find a bottom here. Picking bottoms is usually a fool's errand, so I don't recommend anymore than just a small positioning in a portfolio to start. But with Vale offering a 5.2% dividend and Freeport sporting 4.4%, you do get paid to wait -- and you can ask yourself as you buy it, "How much lower can it go?" That's not usually the right reason for buying a stock, but here I make a small and temporary exception, particularly considering the upside potential in a metals recovery. I talk more about the miners with Joe in the video above. At the time of publication the author had no position in any of the stocks mentioned. Follow @dan_dicker This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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