Fortescue Ltd (ASX: FMG) shares were once a sizeable part of my portfolio, but I recently sold my last holdings in the ASX mining share.
This year has been rough for the ASX mining share, as the chart below shows. But, I'm pleased I was able to sell at a good price and move on to businesses I'm more optimistic about.
I originally bought Fortescue shares (at a low price) when there were significant concerns about the iron ore sector due to slowing demand from China, which buys a large majority of the iron ore exported from Australia.
When demand drops (or supply increases), it can lead to a decline in the iron ore price. That situation can create a good time to buy.
But a key driver of my original investment was also based on the company's green energy goals.
Why I decided to sell out of Fortescue shares
A few years ago, the company outlined its plans to become a major producer of green hydrogen and green ammonia, positioning itself to diversify its earnings and tap into what seemed to be a promising area for long-term growth. It even signed a few customers for green hydrogen.
However, things have changed a lot since the early 2020s.
While the US may have been a key driver of a possible green energy future under President Biden, there has been a clear shift in the last year (or longer) in some areas of the world.
Rising inflation seemed to mean climate action became less important for households, politicians, and businesses. President Trump's win also changed the energy focus of the world's biggest economy.
Fortescue's priority now seems to be decarbonising its own operations. That's probably a prudent move, but the step down in ambitions about green energy production reduced my interest in the business' long-term prospects.
The other reason I decided to sell Fortescue shares was that the iron ore supply and demand relationship no longer looks as appealing as it once did.
China's economy is not firing, and with US tariffs on the country, I'm not sure how strongly it's going to perform in the foreseeable future. Plus, major iron ore miners are trying to increase production, adding to the supply side of the equation. The new Simandou project in Africa, in particular, could be a headwind for the iron ore price, unless Chinese demand surprises positively.
Taking all of the above into account, I thought the higher Fortescue share price would be a good time to offload shares.
If the iron ore price and Fortescue share price were to sink in the short term, I may see it as an opportunistic turnaround idea, but it's not at the top of my watchlist.
Valuation
Based on the forecasts from Commsec, the Fortescue share price is valued at 14 times FY26's estimated earnings, with a possible grossed-up dividend yield of 6.5%, including franking credits, at the time of writing.
