That's hard to say.
If I were a technical trader I would suggest that it wouldn't fall through being a major $16 major support level.
But I am a fundamental value investor and in my opinion the current price is already below it's intrinsic value, hence I would consider FMG a buy at this level.
My call is based on the following factors:
- Strong cash flow generation.
- FMG is also one of the lowest cost producers.
- Aud under pressure and coupled with impact from Covid further room to fall. Favourable conditions for Australian exporters. So while the iron ore price may be coming off a bit we still have a cheaper Aud as an offset. Full disclosure, I am more bullish on the AUD longer term due to favorable industries and demographics.
- FMG is innovating into new areas of green hydrogen production and clean energy generation. Creates a point of difference to FMG vs RIO and BHP. Fully disclosure, I also own a sizeable stake in RIO. The more I read about the prospects of Green Hydrogen the more bullish I become.
- Steel should be in need with the favorable economic backdrop with governments stimulating like it's going out of business to stave off recessions.
- Steel in long term up cycle with expected demand to de-carbonise the planet.
- Very extended valuations in areas outside the commodity producer space. So some amount of valuation catch-up is possible. I also like the prospects investing in real assets rather than financial assets.
- Commodities tend to do well or better in inflationary environments. It can in some ways be seen as a hedge on inflation.
- Additionally, FMG appears to be going through a bit of a wash out at the moment which means you may be getting bargain prices. Be greedy when others are fearful, etc.
- I am trying to build out more of a income portfolio. My current positions are mostly positioned around growth and so FMG is providing me much needed diversification.
Sorry to harp on. I just thought it would be better give you a more complete answer because investing is a complicated beast.
Please don't consider this investment advice. I am not a qualified investor advisor or anything. Do your own research, etc etc...
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