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Are the big miners a sell?

It was a nasty day for investors in iron ore mining stocks yesterday after the price of iron ore sunk 2% to US$114 after traders reacted negatively to data showing Chinese exports had their biggest drop since the Global Financial Crisis (GFC).

In response to the weak Chinese economic data there was widespread selling across the mining sector. Heavyweights BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) ended Monday down 4.1% and 5.8% respectively – representing big single day moves for the majors. Meanwhile Fortescue Metals Group Limited (ASX: FMG) which lacks the diversification of the two majors took a thumping with its share price falling 9.4%.

All three stocks are now showing negative returns for calendar year 2014. While the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is still registering a gain of 1.1%, BHP is down 4.8%, Rio is down 10.2% and Fortescue is off 15.5%.

Foolish takeaway

As always it’s important for investors to keep things in perspective. Iron ore prices are still very strong by historical standards and overall the share prices of these three mining giants are hovering closer to their 52-week highs than lows. This of course is also the reason for concern as it suggests there is plenty of potential downside. This is particularly concerning for investors in Fortescue given the company’s sole reliance on iron ore. For conservative investors, the diversified asset base of BHP and Rio could provide a safer option.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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