Anglo American is a multinational mining firm with a portfolio that spans diamonds, platinum, copper, iron ore, and more. Its operations are conducted in Africa, Europe, North America, South America, and Australia.
Raw materials and commodities are a volatile market, which can often affect financials, share price, and investor sentiment. I think firms such as Anglo have the global reach and financial muscle to offset some of this volatility.
As I write, shares in Anglo are trading for 2,879p per share. Twelve months ago, shares were trading for 1,969p per share which means the share price has increased over 45% in 12 months. In 2021, Anglo’s shares are up 18%.
Four reasons I like Anglo American
- The current economic recovery has seen the potential for rising interest rates due to inflation. As a potential investor, my investment could be safe as the price of commodities tends to rise during inflation. This offers me and my money a certain amount of protection. As I mentioned earlier, I think firms with a larger reach and financial muscle are often in a better position to ride economic fluctuations and I believe Anglo could be perfect in this scenario.
- My belief is that the best shares to buy now perform on a consistent basis. Anglo is no different. For example, in its most recent interim report released at the end of July for the six months ended 30 June, results were positive. Anglo reported a revenue increase of over 100% compared to the same period last year, thanks to rising demand and resilient performance. Historic performance is also favourable. I understand past performance is not a guarantee for the future, but I use it as a gauge nonetheless.
- Anglo confirmed in its interim report that it would be paying a $2.51 per share dividend too. When shares I invest in make me a passive income, I am a happy investor. This interim dividend is a result of strong performance.
- I believe Anglo is undervalued based on current levels. It currently has a price-to-earnings ratio of just over 7. With such strong performance and a solid balance sheet, I believe it could be a good opportunity for me to buy right now at a cheap price.
The best shares to buy now have risks
Despite all the positives, I would be naive to ignore potential risks. Firstly, commodities are at the mercy of the ongoing pandemic. A prime example for Anglo is the rising number of Covid-19 cases in China. China is one of the biggest markets for raw materials and commodities. This could affect its financials. Another risk linked to the pandemic is the decreasing cost of platinum, which could cause issues for Anglo as well.
Even with these risks in mind, I believe Anglo American is one of the best shares for me to buy now on the FTSE 100. I would add shares to my portfolio today.
Jabran Khan has no position in any of the shares mentioned. 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.