By Augustin Eden, Analyst 

Rio Tinto is definitely a favourite among the more old fashioned retail investors – those who perhaps remember more booming times but, more descriptively, those who may be seen by some as a little ‘stuck in their ways.’  Mining stocks are not performing as they used to, with a much talked about commodities super cycle purportedly coming to an end not at its lofty peak, but in a deep trough (although anyone could observe such a fact given several months of declines up to now) on a slowdown in China and worries that the US may imminently make things even slower by raising interest rates. What’s more, the miners are seemingly only now becoming accustomed to the fact that low commodity prices are set to continue.

What does one do when a company’s profits plunge by 80%, when such a plunge is in line with guidance? Most of us look elsewhere for profit potential, but don’t forget that a profit’s a profit. Maybe reporting any profit at all in such challenging times is a positive.

A kind of madness 

Of late we’ve seen gold miners’ share prices benefit, however temporarily, from a simple reiteration of full year guidance.

“…times are tough, but we’re surviving and we reckon we’ll see the year out just fine, like we said we would…” 

Welcome news in hard times. On the flip side we’ve seen that reporting a record breaking profit has done nothing to stifle the nerves of ‘invessimists’ who’d rather worry about the future.

“…we’ve got so many greenbacks kicking around after dishing out dividends to you lot, we’ve allocated 0.0001% of them to be used as toilet paper. But we’re a little bit worried we might not sell as many iPhones in the second half of the year…”

Meet the financial markets – the only arena in reality where cold, hard science (the micro- and macro-economics that influence decision making) and fickle irrationality (everything else) exist in blissful harmony.

With all this in mind, are people still wrong to be ‘sticking to what they know’ in mining stocks like Rio Tinto? Probably not! In fact, the miners could be where the next big moves come from. Expectations are low. Excitement high. The unknown ever present. Not like those big, overvalued tech behemoths. And boring, ‘too big to fail’ banks.

With this supposed super cycle (the bit science talks about) at or near its bottom, we may do well to look again at the UK Index miners and who better than the old favourite Rio Tinto? After all, where there’s trading volume, there’s moves in that there share price. Up or down? It doesn’t matter, just pick an investment product that allows you to speculate on falling prices (no need to google it – you’re in the right place already). And remember one thing: Follow the crowd, but get out just before it goes bonkers.