Since the turn of the year, shares in Anglo American (LSE: AAL) have surged by 110%. That’s largely because of a more upbeat outlook for commodity prices, but is also down to the company’s new strategy that should produce a leaner and more profitable entity in the long run. Crucially, Anglo American’s reorganisation should make it financially stronger and better able to cope with a prolonged downturn in commodity prices.
Realistically, that could happen. Brexit has the potential to hurt the global economic growth outlook and with Chinese demand for resources coming under pressure as its economy slows its rate of growth, the future for Anglo American is undoubtedly uncertain.
However, with the company’s shares offering a wide margin of safety and it having a sound strategy and upbeat near-term profit outlook, it seems to be a stock to stick with despite its vast share price gains year-to-date. For example, Anglo American trades on a price-to-earnings growth (PEG) ratio of just 0.5 and while there are a number of bargains in the resources space, Anglo American seems to be among the more favourable of them.
Good time to buy?
Also enduring a tough time in recent years due to commodity price falls has been Centrica (LSE: CNA). The falling price of oil has hurt its oil and gas division to such an extent that Centrica has decided to sell-off multiple assets to become a more focused domestic energy supplier. The transition will take a number of years but with the promise of major cost savings as well as a more robust earnings outlook, Centrica could become a much more popular stock among nervous investors over the medium term.
Despite Centrica’s dividend being cut, it still yields a relatively appealing 6.2%. And while further dividend reductions can’t be ruled out, Centrica is likely to continue to yield more than the wider index in the long run as it focuses on improving cash flow and de-risking its operations. As such, now seems to be a good time to buy it.
Meanwhile, Standard Chartered’s (LSE: STAN) shares have come under pressure and been down by as much as 16% following Brexit. That’s despite the bank being Asia-focused and much more dependent on China and the rest of that continent for its future growth. Certainly, Brexit could have a knock-on effect on global economic growth, but with rising wealth in China and across Asia, Standard Chartered seems to be well-placed to benefit.
Furthermore, Standard Chartered offers a wide margin of safety right now. It has a forward price-to-earnings (P/E) ratio of just 14.8 and with it having a sound strategy that focuses on improving its compliance function as well as slimming down the bank’s management structure, Standard Chartered’s future profit growth outlook appears to be positive. So, while further volatility seems likely, it appears to be a stock to stick with in the coming years.
Peter Stephens owns shares of Anglo American, Centrica, and Standard Chartered. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.