About: Fortescue is the world's fourth largest iron ore producer and holds the largest tenement portfolio in the Pilbara region of Western Australia. The company has three main mine sites with two additional mine hubs under development. Fortescue also owns and operates 620km of heavy haul railway connecting its mine sites to Port Hedland where it has five operating berths.

Why it is in the portfolio: FMG provides the portfolio with exposure to a large-cap diversified resources exposure with a reasonable level of income via a gross dividend of around 6%.

Fundamentals: FMG currently trades on a price-to-earnings ratio of around 10x forward earnings which is a discount to that of the majors BHP and RIO. FMG currently trades at around 1.2x price-to-book and offers around an 8% gross dividend yield at around a 60% dividend payout ratio. FMG's debt stands at around $3bn or a gearing level of around 23% debt-to-assets which is on the high side when compared to peers such as RIO or BHP. That said, FMG has been actively paying down debt while also providing investors with a dividend stream.

What could go wrong: FMG’s fate and fortunes tend to be linked to the underlying prices in the commodities in which they operate, which in FMG's case is iron ore. As such, investors should be aware that price fluctuations in these underlying commodities can have an impact on the profitability of the business and hence the share price. However, in FMG's case the price they receive for their While Rio is a globally diversified business with operations in many countries and has largely diversified away mine specific risk, investors should be aware that from time to time single mines or operations may experience singular specific risks which may impact the share price in the short-term.