The South32 Ltd (ASX: S32) share price certainly has been a strong performer in 2019.
Since the turn of the year the mining giant's shares have rallied almost 17% higher.
Is it too late to invest?
According to a note out of Goldman Sachs, it could be too late to invest in the diversified miner.
Today's note reveals that its analysts have downgraded South32's shares to a sell rating with a price target of $3.20. This price target implies potential downside of 17.5% over the next 12 months.
The broker made the move due to concerns that South32 could have had a weak March quarter and on valuation grounds. Based on Goldman's estimates, the miner's shares are trading at 1.3x net asset value (NAV).
As a comparison, Goldman estimates that BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), and Rio Tinto Limited (ASX: RIO) shares are trading at a NAV of 1x.
The broker is neutral on all three shares, but still sees "upside risk to iron ore prices and earnings as the market deficit from the supply side disruptions in Brazil and now Australia."
One miner that its analysts are positive on is Alumina Limited (ASX: AWC). Goldman has a conviction buy rating and a $2.70 price target on the alumina producer.
Its analysts believe Alumina is well-positioned because its "model shows the alumina market remains in deficit in the Atlantic basin while the Alunorte refinery operates at 50% capacity and China flipped to a net importer in February."
Which mining shares should you buy?
I think Goldman Sachs makes a great point on Alumina and it could be worth a closer look. But my preference in the sector continues to be BHP. This is due to the combination of favourable commodity prices, its low cost operations, high levels of free cash flow, and capital return possibilities.
