Twiggy ups Fortescue stake

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.

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked…

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of The Motley Fool’s Top 3 Blue Chip Stocks for 2019.

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in a specially prepared FREE report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

See the 3 blue chip stocks

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.