Down 25% from its early March highs, CompanhiaVale do Rio Doce's (NYSE:RIO) stock certainly suggests that investors have lost faith in the bull-run in hard commodities. As concerns about slowing economic growth and increasing worldwide production mount, it's tough to find a metal producer that hasn't sold off in the past couple of months.

Whether the Street is fairly discounting a decline in commodity prices in the second half of the year, CVRD still managed to post a decent first quarter. Revenue climbed more than 34% on an annual basis (dipping 4% sequentially) as the company saw double-digit increases in year-over-year pricing and volume shipped.

On the flip side, profits suffered because of some operating issues at the company's mines and difficulties with rail transport caused by rain-induced landslides. Consequently, CVRD missed consensus earnings expectations.

Despite its underperformance and Wall Street's souring mood toward commodity companies, it's not all bad at CVRD. Expansion efforts continue at several mines, and the company continues to develop new projects in coal, nickel, and other metals that will help reduce the company's reliance on iron and iron pellets.

What's more, the first-quarter results did not include the benefits of the higher prices CVRD secured for its iron ore. CVRD increased prices by an average of 71.5%, giving investors good reason to expect improvement in results throughout the remainder of 2005.

Though some indicators are moving against these companies (lower economic growth and more supply coming online), worldwide inventories of metals remain low, and slowing growth does not automatically mean market contraction is imminent.

Looking at valuation, CVRD appears to be trading at a considerable discount to other miners such as Rio Tinto (NYSE:RTP) and BHP Billiton (NYSE:BHP). Given CVRD's higher return on assets, better margins, and improved pricing, I'm not sure such a discount is appropriate.

That said, commodity prices do look to be easing off their highs, and institutions seem to be fleeing the sector. Although that might spell "opportunity" to contrarians, investors should tread lightly -- after all, it's not much fun in the short run to hold a stock that nobody else wants to own.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).