It is always a relief when you shoot down a stock that most analysts are hailing as a buy, and subsequent events prove you right.
I dumped my entire stake in mining giant BHP Billiton (LSE: BLT) (NYSE: BBL.US) one year ago, and the share price subsequently collapsed by 25%. That was the best investment call I made last year.
I also spent the first six months of 2014 disagreeing with the market consensus that Rio Tinto (LSE: RIO) (NYSE: RIO.US) was a buy. I wasnt wrong to rubbish Rio, it is down 16% in 12 months.
Finally, the market is catching up with me, with Credit Suisse and Investec Securities, downgrading BHP Billiton a notch to sell and underperform respectively.
In A Hole
I still admirethese two market dominant, well-managed businesses, I just thought that events were moving against them.
When China was guzzling iron ore and copper to feed its infrastructure and credit boom, BHP Billiton and Rio Tinto could only grow fat on the proceeds.
But as the country battlesto control a property and credit bubble, while bursting at the seams with over-priced and under-tenanted tower blocks, the good times simply couldnt last.
Dig Baby Dig
I also feared that all that talk about a commodity super-cycle had distorted investor attitudes and given them inflated expectations of how fast BHP Billiton and Rio Tinto could continue to grow.
Finally, I questioned their strategy of meeting falling prices by ramping up production to record highs.
Falling demand and rising supply could only means one thing in the short term, I decided, and bailed out.
Cash Is King
I think management atboth companies have got their strategies broadly right by cutting capital expenditure and focusing on cash generation.
This has also helped keep investors happy: dividend hikes and share buybacks always go down well.
Untrammelled production might force metal prices evenlower in the short term, but should also boost BHP and Riosmarket share in the longer run, by squeezing out smaller competitors with relatively higher costs.
At some point, I will look to move back into the stocks. But we havent reached that point yet.
China is still slowing. US growth expectations may have been inflated. The Federal Reserve may hike rates this year. Global growth is unsteady.
The time to buy BHP Billiton and Rio Tinto will one daybe upon us, but we arent there yet.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.