With a decline in the Anglo American share price, I recommend this FTSE 100 stock as an immediate buy!

Even though Anglo American plc (LON: AAL) has outperformed the FTSE 100 over the past year, it is available at attractive valuations, making it a great buy right now.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Equity markets have been a bit of a snooze in the past few days, with the FTSE 100 making sideways movements. Understandably, this is hardly an inspiring time for fresh investment decisions. But some companies are sure looking attractive right now!

Recently, I talked about gold miner Randgold Resources, which makes for a great defensive play in the event of an economic slowdown. But even otherwise, there are other interesting mining companies around. Case in point being the multi-commodity miner, Anglo American (LSE: AAL), which has a lot going for it right now too!

Strong financial health

First things first: the company’s fundamentals are solid, with much potential to provide great returns to investors moving forward. Both its revenues and profits are strong and growing. In its last results update, Anglo American also showed reduced debt, which is positive for its long-term financial sustainability.

I like the fact that the company has been able to keep debt contained, despite its recent investments. Most recently, its subsidiary acquired complete control over a South African platinum joint venture by buying out the other stakeholders. Anglo American also invested in a copper project in Peru a few months ago. These purchases have been balanced by selling off interests in other projects.

If you are an investor looking at the dividends, there is positive news here as well. Anglo American has also improved its dividend per share compared to the previous year by a little over 2%.

Dips are buying opportunities at attractive valuations

It is little wonder then, that its share price has significantly outperformed the FTSE 100 index. While the latter is currently at a value lower than that during the same time last year, the former’s share price has risen 25% higher, on average, in November so far.

Admittedly, it is a more volatile stock than the FTSE 100 index, but it is for this reason itself that I believe it should be considered. Higher volatility means that dips are sharper for this stock than the index as a whole as well. This allows for good buying opportunities at such times as right now, since the Anglo American share price has been softening steadily for much of November so far.

But the icing on the cake is really that the price to earnings (P/E) ratio for the company, at 9x, is much lesser than that for peer companies like BHP Bilton, Antofagasta and Fresnillo! It bears mentioning, though, that it’s trading at valuations similar to Glencore and Rio Tinto, but there is almost no company with a significantly lower P/E ratio than Anglo American. In other words, this stock is available at a lower price relative to a number of peers.

I recommend buying Anglo American shares today, if you can stomach short-term volatility in favour of good long-term results!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika does not own any shares mentioned in this article. The Motley Fool UK has recommended Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »