Why I’d Buy Rio Tinto plc And BHP Billiton plc Before Antofagasta plc

Antofagasta plc (LON: ANTO) is pipped by Rio Tinto plc (LON: RIO) and BHP Billiton plc (LON: BLT).

| 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.

opencast.miningToday’s results from Antofagasta (LSE: ANTO) were pretty upbeat. The Chilean-focused miner reported that copper production increased by 5.5% in the second quarter of the year and it maintained its production guidance for the rest of the year. Indeed, shares in the company have delivered strong gains over the last three months, being up 6% while the FTSE 100 is flat over the same time period.

Despite this, I’d still buy Rio Tinto (LSE: RIO) (NYSE: RIO.US) and BHP Billiton (LSE: BLT) (NYSE: BBL.US) before I’d buy Antofagasta. Here’s why.

Compelling Reasons To Buy

With Rio Tinto and BHP Billiton, there are compelling reasons to buy. For example, BHP Billiton is the most diversified mining company in the world. Unlike Antofagasta — which is heavily focused on one region, Chile, and one commodity, copper — BHP Billiton operates mines across the globe and mines a wide variety of commodities. Therefore, it is less prone to disappointment when the price of one commodity falls. Antofagasta, on the other hand, will see its bottom line shrink rapidly if the price of copper falls, or if there are political challenges in Chile for instance.

Similarly, Rio Tinto is a compelling buy, but for a different reason. Like Antofagasta, it concentrates on one commodity: iron ore but unlike Antofagasta, it is trading at an extremely low valuation right now. For example, while Antofagasta currently has a price to earnings (P/E) ratio of 17.6, Rio Tinto’s P/E is just 11.5. That’s 35% lower than its sector peer and, in addition, Rio Tinto’s earnings forecast for next year is slightly ahead of Antofagasta at 9% versus 8%. Therefore, Rio Tinto appears to offer much better value than Antofagasta.

Looking Ahead

Of course, that’s not to say that Antofagasta isn’t worth buying. For investors who are looking beyond the ‘big two’ mining stocks, Antofagasta certainly has merit. The problem with it is that there is no compelling reason to buy it over Rio Tinto or BHP Billiton. It lacks the diversity of BHP Billiton and lacks the value of Rio Tinto.

With the mining sector continuing to benefit from a slight uptick in demand from emerging markets, though, all three companies could continue their recent performance that has seen them easily outperform the FTSE 100. As such, they could deliver strong gains going forward and leave their underperformance of the last few years well and truly behind.

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.

Peter Stephens owns shares of BHP Billiton.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »