The mining industry struck gold | America's a DIY nation |

Hi Finimizer, here's what you need to know for February 24th in 3:07 minutes.

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Today's big stories

  1. Mining giant Rio Tinto reported a record profit
  2. There are still some not-so-obvious ways to profit from the Russian conflict up for grabs – Read Now
  3. Home improvement specialist Lowe’s reported better-than-expected earnings

Out Of Office

Out Of Office

What’s Going On Here?

Rio Tinto reported a bumper 2021 on Wednesday, so let’s hope the miner’s most committed employees have earned themselves a bit of a break.

What Does This Mean?

The prices of essential commodities – think metals, food, and energy – went through the roof last year, as a buckling supply chain struggled to go toe to toe with sky-high demand. That played right into Rio Tinto’s hands: the miner makes around 80% of its money from steelmaking ingredient iron ore, which hit its own record high during the boom. So it follows that Rio’s profit rose 72% last year versus the year before to hit $21 billion – a new record for the miner. But all that cash won’t be sitting idle, with Rio also announcing that it’ll be paying investors $7.7 billion worth of dividends. That’ll bring the company’s payouts for the year to nearly $17 billion – the second-biggest total in the history of the FTSE 100.

Why Should I Care?

For markets: Investors strike gold.
Rio Tinto isn’t the only miner spreading the love: BHP said last week that it’d be paying its biggest half-year dividend ever, while Glencore announced a $4 billion payout a day later. That might be why analysts are expecting the industry’s payouts to represent almost a quarter of all those made to UK investors last year – a far cry from the 4% they represented in 2016 (tweet this).

The bigger picture: The industry has been shifting.
This substantial uptick in payouts over the last few years is a sign of a broader transformation in the industry. Miners have deliberately been moving away from sinking money into risky megaprojects, which can take a long time to actually translate into gains for investors. Instead, they’ve been more focused on paying off debt, putting money directly into shareholders’ hands, and venturing into smaller projects – like copper and lithium mining – that are essential to the clean energy transition.

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Analyst Take

The Not-So-Obvious Ways To Trade The Russian Conflict

The Not-So-Obvious Ways To Trade The Russian Conflict
Photo of Stéphane Renevier

Stéphane Renevier, Analyst

What’s Going On Here?

There are some well-known ways to play this Russian-Ukrainian crisis.

Weapons manufacturers like Lockheed Martin could benefit from more military spending, for example, while oil companies Exxon Mobil could do well out of higher energy prices.

But investors are already wise to those opportunities, and their stock prices have risen accordingly.

What you want is more off-the-beaten track opportunities, like this one and – ooh, that one.

That’s today’s Insight: the not-so-obvious ways to profit from the Eastern European crisis.

Read or listen to the Insight here


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Hate Thy Neighbor

Hate Thy Neighbor

What’s Going On Here?

Lowe’s posted better-than-expected earnings on Wednesday, as homeowners turned to the DIY retailer to give them bragging rights over the family next door.

What Does This Mean?

Investors were worried that Americans would find better things to spend their money on than DIY after lockdowns, but homeowners haven’t parked their aesthetic aspirations just yet. Builders and handymen are still working their way through a backlog of delayed projects, which might be why Lowe’s sales to professional customers – which represent a quarter of the company’s revenue – were 23% higher last quarter than they were at the same time in 2020. That helped boost overall sales in Lowe’s existing stores by a better-than-expected 5%. And since there are plenty more tiles that need to be grouted, Lowe’s upped its 2022 sales and profit forecasts too.

Why Should I Care?

For markets: It’s a game of tight margins.
Lowe’s investors were right to be wary: rival Home Depot said on Tuesday that its profit margin shrank last quarter, and that it would probably take another hit later this year. Its stock fell 9% following the admission, which stands to reason: investors have been anxious about what higher costs would do to companies’ profit margins this earnings season. Lowe’s prediction that its profit margin will be higher this year than last, then, came as a huge relief, and investors sent its shares up 4%.

The bigger picture: US homes are fixer-uppers.
Thing is, there are a couple of trends that would probably be benefiting Lowe’s with or without the pandemic. For one thing, almost half of all single-family homes in the US were built before 1980, which means the crumbling abodes need a lot more attention than they used to. And for another, there are fewer and fewer homes available to buy, which is encouraging homeowners to spruce up the places they have no choice but to stick with.

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💬 Quote of the day

“Everyone shines, given the right lighting.”

– Susan Cain (an American writer and lecturer)
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