Vale S.A. (VALE): A Bull Case Theory

We came across a bullish thesis on Vale S.A. on R. Dennis’s Substack’s Substack by OppCost. In this article, we will summarize the bulls’ thesis on VALE. Vale S.A.'s share was trading at $14.11 as of January 13th. VALE’s trailing and forward P/E were 10.94 and 7.17  respectively according to Yahoo Finance.

Vale S.A., together with its subsidiaries, produces iron ore and nickel in Asia, the Americas, Europe, and internationally. The recent purchase of 6,500 call options on Vale S.A. (VALE) with a $17 strike price expiring January 15, 2027, represents a high-conviction LEAP (Long-Term Equity Anticipation Security) trade by an institutional buyer. At a premium of $0.50 per contract, or $325,000 in total, this position reflects a bullish view on a material recovery in the Brazilian mining giant over the next two years.

The low option cost implies that the market has embedded extreme pessimism into Vale’s equity, creating a highly asymmetric risk-reward profile. For a modest upfront investment, the buyer controls exposure to a Tier-1 global miner, with significant convexity if the stock merely revisits its prior trading range near $16–$17, let alone exceeds it during a commodity upcycle.

The underlying thesis rests on both downside protection and upside optionality. Vale is the world’s largest iron ore producer, and its S11D project places it among the lowest-cost producers globally, allowing profitability and dividend generation even in subdued pricing environments. At the same time, the market underappreciates Vale’s exposure to copper and nickel, key energy-transition metals. By 2027, copper supply constraints are expected to tighten meaningfully, providing an independent re-rating catalyst beyond iron ore fundamentals.

A significant portion of Vale’s valuation discount also reflects Brazil-specific political risk and unresolved legal liabilities tied to past dam failures. Progress toward final settlements would cap these uncertainties and remove a major overhang, a dynamic institutional investors often anticipate in advance. Currency stabilization or appreciation of the Brazilian real would further enhance ADR returns. By choosing a 2027 expiration, the buyer avoids short-term volatility and captures a full commodity cycle, positioning for a potential V-shaped recovery driven by global growth and future rate cuts.

Previously, we covered a bullish thesis on Cleveland-Cliffs Inc. by Unemployed Value Degen in January 2025, which highlighted the company’s vertically integrated steel platform, disciplined capital allocation, and leverage to a steel market recovery. CLF's stock price has appreciated by approximately 34.94% since our coverage. The thesis still stands as operational execution and balance sheet repair remain intact. OppCost shares a similar view but emphasizes asymmetric upside via options and metals exposure at Vale S.A.

Vale S.A. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held VALE at the end of the third quarter which was 32 in the previous quarter. While we acknowledge the potential of VALE as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.