Dream Stocks for Mining Investors

Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and discover the 10 best stocks of the past decade. But I'm more interested in the tools that can help me evaluate tomorrow's greatest companies.

Motley Fool CAPS offers a variety of resources to aid Fools in finding tomorrow's leaders. Our 135,000-member community is full of investors helping each other beat the market.

We'll enlist CAPS to screen for mining companies, then get the story behind some of its more highly rated stocks. CAPS' nifty screener will help us find stocks with:

• A market cap of at least $100 million.
• A three-year revenue growth rate of at least 20%.
• A price-to-earnings ratio of less than 25.

Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.

Opinions with the numbers
Below is a sample of stocks our screen returned. You can run this screen yourself -- remember, though, that your results may differ from ours as the market changes.

Data and star rankings from CAPS as of July 2.

Vale
Vale has fared somewhat better than rivals in an uneven market for iron ore. Steelmakers have been demanding reductions in iron ore prices this year, following on the heels of last year's explosive bull run in commodities. While competitor Rio Tinto was talked into reducing its prices to Nippon Steel by 33%, Vale has limited its price reduction to Japanese and South Korean steelmakers to 28%. Some analysts believe that Vale's agreements and a strong spot market for iron ore may help in the continuing contract negotiations with the Chinese, who are pressing for an even better deal. Operationally, Vale is seeking a competitive edge as it looks for deals with energy companies such as Petrobras to provide for its own consumption.

On the acquisition front, Vale is waiting to pounce. After completing a $10 billion share offering last year, the company was unable to close on its bid for Swiss miner Xstrata, leaving Vale with the financial flexibility of $12.2 billion in cash at the end of the first quarter. At the end of 2008, competing miners Anglo American (NASDAQ:AAUK) and Xstrata had $2.77 billion and $1.16 billion, respectively. While some of the smaller miners are playing hard to get, Vale has the resources to make an offer that is hard to refuse. 

At this point, nearly 98% of the 6,412 CAPS members rating Vale expect it to outperform the market.

Freeport-McMoRan
Despite first-quarter earnings faring lower than analysts' expectations, Freeport is getting stronger, and by June its share price had doubled since the start of the year. Similarly, the price of copper has moved steadily higher since January, mostly due to demand from China; other metals, such as aluminum, have followed, boosting shares in Southern Copper (NYSE:PCU) and Alcoa (NYSE:AA). Freeport sees fundamental, sustainable demand for copper into the future, and many CAPS members expect the company to benefit when the worldwide economy picks up. 

Nearly 97% of the 5,448 CAPS members rating Freeport-McMoRan remain bullish on the stock.

Rio Tinto
Because iron ore producers and the China Iron & Steel Association have yet to agree on benchmark prices for ore, Rio Tinto has been selling iron ore at spot prices that are higher than benchmark prices otherwise would be. Even still, Rio Tinto is shipping a record amount of ore. Many analysts now think Rio Tinto has an edge in the ongoing negotiations, because Rio would be unable to lower prices in the face of higher negotiated prices to non-Chinese steelmakers and higher spot prices. The continued demand on the spot market should help the company announce strong numbers in its second-quarter output report due in mid-July.

Rio Tinto recently scuttled a financing deal with Chinalco and instead opted for a joint venture with BHP Billiton (NYSE:BHP). Between its iron ore joint venture with BHP and a rights offering, Rio Tinto will receive about $21 billion. This cash will help it make good on a big chunk of its roughly $38 billion in debt related to its purchase of Alcan two years ago. Also, BHP and Rio Tinto anticipate as much as $10 billion in savings from their joint venture. And the pending sale of Alcan's American food-packaging division will add another $1.2 billion. 

More than 96% of the 1,329 CAPS members rating Rio Tinto are bullish.

Let 135,000 members be the jury
The collective wisdom of a huge pool of investors can help give context to a page of numbers from a stock screen -- but individual investors are still the best judges. Fools should always perform their own due diligence.

Run your favorite factors through the Motley Fool CAPS screener.