Telegraph's Questor isn't so keen on RIO, making it an "Avoid" in the article of 25th July 2021, extract below, (behind a paywall):
As those profits suggest, this is a great time to be digging up iron ore. Its price rose by almost 85pc last year and the reason is not hard to find: China accounts for a huge percentage of the world’s steel production and its consumption of the alloy grew by 9pc last year.“Iron ore is at a fantastic price for the miners – it is dream time for them,” the manager of a natural resources fund told Questor. He said it was “boom time” in Western Australia – “all the mines are flat out, there is no labour availability, labour cost inflation is horrific”.
Despite this, Rio’s shares don’t look expensive. They have risen along with the iron ore price but yield a tempting 6.9pc if we include the special dividend. The free cash flow yield is in double figures.
Why? “The iron ore price is very high but the market doesn’t think this will continue. It’s literally as simple as that,” another resources investor said. “China accounts for the vast majority of demand and the Chinese are stimulating that side of their economy. No one knows when it will end – it’s a punt.”
Put another way, Rio’s share price ultimately depends on how many roads, airports and bridges the Chinese politburo decides to build. As if this were not already hard enough to predict, those decisions in turn depend on whether the Communist Party favours pursuing economic growth by promoting exports and infrastructure spending, the traditional route, or by encouraging consumer consumption. It has swung between the two in the past and may easily do so again.
Why would you tie your investment returns to the decisions of politicians in a country on the other side of the world, especially when you have little insight into how those decisions are made? Buying shares in Rio Tinto is a gamble pure and simple. Avoid.
Questor says: avoid