Twiggy ups Fortescue stake

Andrew Forrest buys $23 million worth of shares

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

Andrew 'Twiggy' Forrest, chairman of Fortescue Metals Group (ASX: FMG), has upped his stake in the company, buying more than $23 million worth of shares.

According to a company announcement, Mr Forrest purchased an additional 5.2 million shares, at a cost of more than $3.6 million, between 17 September and 23 September. According to Bloomberg, Mr Forrest now owns 32.78% of the company.

Mr Forrest received more than $100 million in dividends recently, thanks to the company declaring a better than expected dividend of cents per share.

The move comes as legendary hedge fund manager Jim Chanos announced that he was shorting Fortescue shares, despite a strong recovery in the iron ore miner's share price over the past six months. Fortescue shares have climbed more than 21% since March 2013, while the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up just 5.2%.

Prices for iron ore have stayed fairly steady at around US$130 a tonne, despite analyst predictions of a crash down to around US$70 a tonne. On that basis, Fortescue should report strong revenues, profits and cash flow in the 2014 financial year, as it ramps up production to 155 million tonnes annually. And the company will need to generate continued strong cash flow to repay debts of around US$10 billion.

Strong Chinese demand for iron ore is supporting the commodity price, although expectations are that over the longer term, iron ore prices will fall to around US$100 a tonne as demand tapers off. Prices could also fall if a surge in new supply comes on stream, as the iron ore giants BHP Billiton (ASX: BHP), Vale and Rio Tinto (ASX: RIO) ramp up production.

Foolish takeaway

Clearly, Mr Forrest believes there are no dark clouds on the horizon for Fortescue, hence the purchase of stock, and he could add even more shares to his holding in the weeks ahead.

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

Motley Fool writer/analyst Mike King owns shares in BHP.

More on ⏸️ Investing

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 »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »