There are lots of different approaches which can be utilised when it comes to selecting stocks for inclusion in a portfolio, but in broad terms investors usually fall into one of the following two categories: 'growth' or 'value'.
For the past few years, investors have been buying resources stocks from the mighty BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) right down to the minnow explorers on the presumption they are growth stocks providing exposure to growing commodity demand from Asia.
The heat has obviously come-out of the sector over the last couple of years as bullish growth figures on China have been scaled back. Interestingly, whereas resource stocks were previously viewed as growth stocks, many could now appear to be in value territory.
As I warned here, the iron ore sector is not without its risks, however at current prices certain stocks such as Fortescue Metals Group Limited (ASX: FMG) are starting to look appealing. According to analyst consensus data supplied by Morningstar Research, Fortescue is forecast to earn 71.9 cents per share (cps) in 2015. While this level of earnings is a long way down on the expected 109.6 cps in the current year, it is still well above the 53.3 cps earned in 2013.
What's more, the levelling off of expenditure is allowing Fortescue to massively ramp-up its dividend with the payment practically doubling from 10.8 cps in 2013 to a forecast 20.5 cps in 2015.
With the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) trading on an average PE for 2015 of approximately 14.3 and a yield of 4.7%, investors buying in to Fortescue today would be picking up stock in the iron ore miner on a forecast price-to-earnings ratio of just 6.4 and a fully franked dividend yield of 4.5%.