Here’s a cheap UK stock that could soar while Donald Trump’s US President

Looking for UK stocks that might benefit from Donald Trump’s second term as US President? Here’s a value share to consider today.

| More on:
The flag of the United States of America flying in front of the Capitol building

Image source: Getty Images

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.

UK stocks are soaring again as confidence returns to global financial markets. Both the FTSE 100 and FTSE 250 have printed strong gains in recent days following Donald Trump’s return to the White House.

In fact, London’s home to a multitude of shares that could benefit substantially from the Republican’s second run as US President. Here’s one I feel could pay off during the next four years and is worth considering.

Bouncing bullion

Precious metals prices are on the front foot again in the days following Trump’s inauguration. This reflects huge macroeconomic uncertainty that the New York native’s unconventional approach to governing creates.

That’s not all though. A series of statements, from talk over the US absorbing Greenland and Canada to proposed trade tariffs, have the potential to fuel inflation and exacerbate existing geopolitical tensions. These are natural drivers for safe-haven assets like gold and silver.

If Trump’s last stint in Washington is anything to go by, bold policies on the economy and world order could dominate his second term, in turn supporting demand for flight-to-safety assets.

Gold star

This bodes well for gold miners like Pan African Resources (LSE:PAF). As you can see, this FTSE 250 share has risen again recently thanks to resurgent bullion prices.

Investing in mining stocks can be riskier than, say, purchasing an exchange-traded fund (ETF) that simply tracks the metal price. This is because company earnings can be crushed by exploration and production issues or problems with mine development.

But on the other hand, owning metal producers can deliver superior returns if operational performance impresses the market. With Pan African Resources, production at its Mogale Tailings Retreatment (MTR) plant continues to ramp up following commissioning in October. It has also recently acquired low-cost operator Tennant Consolidated Mining to give group output a significant shot in the arm.

Another thing to consider is the cheapness of the South African miner’s shares. At 39p per share, it trades on a forward price-to-earnings (P/E) ratio of 6.3 times.

Furthermore, its price-to-earnings growth (PEG) multiple sits comfortably below the value watermark of 1, at 0.1.

Low valuations like these can lead to strong share price gains if market conditions remain supportive and operational newsflow impresses.

An attractive value share

There’s no guarantee that gold prices will continue rising, of course. And this could severely impact Pan African Resources, regardless of how well it’s run or the cheapness of its stock.

A less unpredictable approach from the returning President could sap some of the tension surrounding financial markets. Other factors like a rising US dollar could also harm the performance of buck-denominated assets like precious metals.

Yet on balance, I think the outlook for gold prices remains highly encouraging. And I’m not alone. Analysts at Saxo Bank, for instance, think the yellow metal will strike fresh record peaks of $2,900 per ounce by the end of the year. Others are even more bullish.

Against this backdrop, I think Pan African shares are worth serious consideration.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK 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.

More on Investing Articles

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

2 UK shares that could soar if interest rates sprint lower!

The Bank of England's latest meeting has fed speculation of swingeing interest rate cuts. I think these UK shares could…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

My favourite FTSE dividend stock just jumped 17%! So why am I sad?

This investor has mixed feelings today as a quality dividend stock from the FTSE 250 surged higher in his portfolio.…

Read more »

Investing Articles

Here’s why AstraZeneca stock jumped nearly 6% in the FTSE 100 today

FTSE 100 heavyweight AstraZeneca helped propel the blue-chip index to a record high today. Here's what investors were cheering.

Read more »

Closeup of "interest rates" text in a newspaper
Investing Articles

Interest rates fall again! Here are 3 FTSE dividend growth shares to consider buying

As interest on cash savings becomes increasingly less attractive, Paul Summers has been looking at dividend growth shares for passive…

Read more »

Investing Articles

Up 10% today, I think this FTSE 250 growth share could continue to surge!

Babcock International's flying after upgrading its full-year forecasts. I think the FTSE 250 defence share might just be getting started.

Read more »

Investing Articles

The AstraZeneca share price jumps 5% on today’s strong results – but is it too expensive?

Harvey Jones hails the brilliant long-term performance of the AstraZeneca share price, but wonders whether the FTSE 100's biggest company…

Read more »

Investing Articles

Is this my chance to buy Alphabet shares?

A big step up in AI spending at Google has investors nervous, but has it created an opportunity to buy…

Read more »

Senior woman potting plant in garden at home
Investing Articles

£10k in savings? Here’s how an investor could aim for a monthly second income of £1,200

Mark David Hartley considers how investors could build towards an early retirement plan with a second income from a portfolio…

Read more »