These 3 miners have smashed the market – should you be buying?

The price of the commodity remains strong and shares continue to climb, so should you consider buying in?

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's been a rollercoaster ride for shareholders in Australia's largest miners this year as conflicting views have emerged regarding the future of the industry whilst commodity prices have also remained volatile.

Earlier in the year, there were strong signs that suggested that the mining boom was well and truly a thing of the past. Demand for commodities from China continued to fall whilst, at the same time, the miners were ramping up their production – so where was the value?

As time has passed, however, analysts and investors alike have been proven wrong, with commodity prices remaining resilient. Iron ore, for instance, has again defied predictions of a fall this quarter as analysts had expected demand to decrease as China went into their winter period. In fact, miners of the steelmaking ingredient drove the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) forward yesterday as it once again closed in on the US$140 per tonne price tag.

The commodity is currently priced at US$138.20 a tonne after having risen $US1.40 overnight. The question for investors however, is whether or not they should be exposing their portfolio to stocks from this sector.

It's difficult not to ponder the possibility considering the enormous returns realised from the commodity's miners in recent months. Fortescue Metals Group (ASX: FMG), for instance, has climbed an incredible 96% since June whilst Mount Gibson Iron (ASX: MGX) has returned 173% in the same timeframe. The gains haven't stopped there with Atlas Iron (ASX: AGO) also jumping 74%.

Whilst the gains from the bigger miners, namely BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO), haven't been quite as substantial due to their diversified operations and sheer size, they have still been impressive! BHP has returned 21% and Rio has jumped 33%.

Foolish takeaway

As the miners ramp up their production levels and the price tag on the commodity remains high, there are certainly positive signs for the future. However, there are also enormous risks still facing the sector and commodity prices will inevitably fall in the long run.

Whilst shares in the miners could continue to climb higher from today's level, I believe there are more attractive long-term opportunities with a lower level of risk attached.

 

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »