World-Class Mining Stock: UK’s Rio Tinto (RTP)

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It’s an interesting time to be a political animal living in New Hampshire. It gets interesting every four years when the presidential primary juggernaut chugs into view.

Of course this year the juggernaut isn’t chugging. With state after state trying to grab a little bit of political leverage for its issues (and a little piece of the campaign funding pie, too), this year’s primary will be earlier than ever. New Hampshire’s statutes require that its primary be held before any other state’s, so every state that’s tried to move closer to the front of the line has just pushed New Hampshire’s primary earlier and earlier. The calendar is now set, and I’ll be voting on Tuesday, January 8.

The result of all this schedule jostling is that the nominating process for both parties will be pretty much over on Super Tuesday, February 5. That day will feature primaries in 20 states, including delegate-rich New York and California, and it will take an unlikely split in voting patterns to keep more than two candidates per party in the running. The odds favor at least one of the party’s nominations being sewn up when the dust settles. But it will still be New Hampshire that decides the early fortunes of the candidate crew.

It’s certainly natural for lots of states to want to be seeking some influence and policy input by pushing its primary date up. It’s also natural that lots of Americans resent the attention (and the economic benefits) that New Hampshire gains from its first-in-the-nation primary. (Iowa squeezes ahead of N.H. on the technicality that its delegate-selection event is a caucus, not a primary.) And finally, lots of people wonder whether it’s a good idea for a small state that’s nowhere near the national average in its ethnic, racial or economic composition to be taking the first crack at picking our national parties’ candidates.

As a long-time New Hampshire resident and a keen observer of the political process, I think my state is actually a great place for a first primary and does the nation a huge service by doing so. Here’s why.

Running for president in New Hampshire is done on a retail level. New Hampshire has one statewide newspaper (The Manchester Union Leader) and one regional TV station, both of which are considered to be part of the state’s conservative establishment. You can’t really use them to reach the independents and Democrats of the state, nor even many of its Republicans.

All serious candidates buy time on the big Boston stations to reach voters in the populous southern tier of the state, but that doesn’t cut the mustard in The Granite State. New Hampshirites demand (and get) time to talk to presidential aspirants, look them in the eye and ask them questions about what’s on their mind. There aren’t that many people in New Hampshire, and candidates know that every vote is worth fighting for. So they do.

New Hampshire is small.

This is really the big fact behind the two reasons I’ve given above. Someone who wants to run for president can come to New Hampshire a few years ahead of time and get to know the party leaders of the entire state. I’ve talked with candidates who drove around the state for weeks at a time (it’s less then 200 miles, north to south, and less than 70 miles east to west) and talked to whoever would listen (the entire state has fewer people than the cities of San Diego, CA or San Antonio, TX). And if people liked them, they’d read their flyers and introduce them to their friends.

We New Hampshire voters take our jobs very seriously. New Hampshire voters get to know their candidates by listening to them in Elks, Moose and VFW Halls and high school gymnasiums. We meet them in coffee shops and diners and on the streets outside factories and malls. We take our responsibility to the nation seriously, and don’t very often get fooled by promises and clichés. If we are going to demand that politicos stand out in the snow and meet people, we have to be willing to go out into that same snow to do the meeting. And we do.

New Hampshire voters are famous for delivering surprises. We look behind the polls and challenge the common wisdom. And when we like what we see, we deliver a message to the rest of the country that the surprised candidate is (or isn’t) the genuine object.

So, that’s the case for New Hampshire as I see it. Maybe we don’t have a big population of minorities or immigrants, but we take individual rights seriously and have the Civil War monuments and graveyards to prove it. Perhaps we’re a little more conservative than some states outside of New England (although that’s changing rapidly as newcomers flock to the south of New Hampshire to take advantage of our lack of both a sales tax and an income tax), but it’s a kind of conservatism that roots for underdogs and mistrusts authority – the state motto is Live Free or Die, and there’s a little bite left in it.

Eventually, the economics and ideology of bigger states will probably strip New Hampshire of its special place in the nominating process. But the downside will be a transition to wholesale, media-based campaigns that will allow candidates to court huge populations of voters with radio, TV and direct mail campaigns. There won’t be a small group of dedicated political junkies looking candidates in the eye and testing their handshakes and asking the toughest questions they can think of. And something will be lost.

You may be asking what does all this political talk have to do with investing? Not much, really. But when I first moved to New Hampshire back in the late 70s, when the cows still outnumbered the people (true!), I was deeply skeptical about the influence that my granite-headed neighbors had over the selection of our national leaders. Since then, I’ve come around, and I just wanted to get my opinion out there.


I’ve been a huge fan of the movies for as long as I can remember, everything from Citizen Kane and Casablanca to Pulp Fiction and Run, Lola, Run. Every year at Thanksgiving I give thanks for the Internet Movie Database (with its information on 1,028,428 movies and millions of movie people) and for DVDs that come in the mail. Life is good.

But I have a particular movie in mind today, one that has haunted me (in a good way) ever since I last saw it on a chewed-up VHS rental tape back in the 80s. The movie is called Gizmo!, and it’s a documentary made in 1977 about the weird inventions that people have come up with over the years and strange things they have learned to do. I still think it’s one of the best “films for the whole family” ever made.

It came to mind again today when I saw in the New York Times that a small group of daredevils (I was going to say loonies, but thought better of it) is trying to make a flying suit that will allow them to sail like flying squirrels and land without a parachute. These suits are made of nylon cloth that stretches between the legs and under the arms, just like the cartoons you see of people about to jump off of garages.

A fair amount of Gizmo! is devoted to early attempts to fly, and several of the inventors shown are using suits that superficially resemble the flying suits in today’s NYT story. And if I’m not mistaken, one of the unsuccessful trials shown was an early parachute pioneer’s fatal 1912 plummet off the Eiffel Tower. All of this failure sets you up for the final, triumphant sequence in the movie that shows people in hang gliders actually living out the dream of soaring like birds. It’s a feel-good moment, and my bet is that the movie will be just as satisfying today as it was in the 80s.

But just to bring this piece back to an investment focus, part of the story of Gizmo! is that sometimes dreams have to wait until the materials come along to make them possible. People had been dreaming of and designing computers for hundreds of years before transistors actually made them practical. The same is true of getting energy from the sun, which had to wait for materials scientists to discover the photoelectric properties of doped silicon, and CD/DVD players, which use lasers to read and write information that let us store, watch and listen to our favorite movies and music when and where we want.

And if you’re trying to build an entire country, the materials you need might just be prosaic steel and copper, and that brings me to my investment idea for the day. The company is Rio Tinto (RTP), the U.K. mining giant that sells billions of dollars worth of iron ore, copper, aluminum and other minerals every year. The company is growing fast because of demand from China and the rest of the developing world, and that growth is having some unexpected consequences.

The first is that Rio Tinto, which has been a buy-and-hold-and-bank-the-dividend stock, is now growing fast enough to put its stock into a recent Cabot Top Ten Report. Part of this growth has happened because the value of the mineral resources that the company already owns keeps on rising.

But part of the stock’s advance is also the result of a proposed takeover bid by Australian mining behemoth BHP Billiton, which offered $130 billion for Rio Tinto. Rio Tinto, for its part, told BHP to take a hike, but the takeover spirit is in the air, and even a company as big as Rio Tinto (market cap $117 billion) isn’t immune.

Investors smell blood in the water, and they may be bidding RTP up in anticipation of a takeover premium. But the stock has been rising on huge demand and positive fundamentals for quite a while, and may not need the added fuel of M&A activity to keep going.

RTP is one of the stocks that showed up for the first time in a recent issue of Cabot Top Ten, which reviews and dissects the ten hottest stocks of the previous week. For investors who enjoy doing their own research and want to find the monster stocks of tomorrow before the market does, Top Ten is an indispensable aid.

You can check it out and try a no-risk trial subscription by clicking on the link right here.

Paul Goodwin
For Cabot Wealth Advisory

Editors Note: Paul Goodwin is the editor of Cabot China & Emerging Markets Report. Rated #1 Top Performing Newsletter over the last 12 Months by The Hulbert Financial Digest.

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