The Motley Fool

Can Anglo American continue to outperform the FTSE 100?

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.

Woman calculating figures next to a laptop
Image source: Getty Images.

FTSE 100 miner Anglo American (LSE: AAL) has been one of the strongest performers in the UK’s leading blue-chip index over the past year. Its shares have gained nearly 68% in the past 12 months, against a rise of just 3% for the FTSE 100. Can the miner continue to outperform the index, or is the stock overdue for a correction?

Trade tensions

Anglo American shares appear to have hit a stumbling block this week. After rallying strongly since the beginning of the year — and looking like £20 a share might finally be in sight — the shares have pulled back over the past week to 1,768p after a top-out at 1,933p on Tuesday.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The company is not alone, however, as shares across the mining sector have been hit this week amid rising trade tensions following a US probe into automotive imports that could lead to new tariffs.


Certainly, it’s hard to ignore the risks of a trade war, given the potential implications for the global demand for commodities, but aside from recent trade fears, fundamentals are broadly supportive. With resilient global growth, demand across almost all commodity groups has picked up, driving commodity prices higher.

Anglo American has also been making substantial progress in what it can actually control — cutting costs, reducing debt and growing production. Its financial performance has improved markedly, yet its shares trade at a significant discount to its peers.


Anglo American shares trade at just 9.9 times its consensus analysts’ forecast for earnings this year, while the sector is on average valued at 12.4 times forecast earnings. On free cash flow, things look even cheaper, with the stock valued at 6.6 times its forecast free cash flow in 2018, against the sector average of 9.1 times.

What’s more, due to its attractive free cash flow, the stock also offers exciting dividend growth potential. City analysts expect dividends per share to rise by as much as 11%, giving it a prospective forward yield of 4.8%. With such tempting income prospects and low valuations, I reckon a re-rating of its shares could quite possibly lie ahead.

Another momentum play?

Another top performer from the FTSE 100 worth watching out for is EVRAZ (LSE: EVR). The steel-maker and miner, which is part owned by Russian billionaire Roman Abramovich, is also benefiting from an upswing in the global commodity markets.

Amid rising prices, net profit swung from a loss of $188m to a profit of $759m last year. Encouragingly, particularly for income investors, free cash flow more than doubled from $659m in 2016, to $1.32bn.

Dividend policy

With net debt falling and the group’s balance sheet in much better shape, the company has returned to paying regular dividends. EVRAZ paid $0.60 per share last year, and looking ahead, the company aims to pay a minimum amount of $300m per annum going forward.

This gives it a minimum payout of $0.21 per share, but City analysts expect it to be more generous. The consensus forecast is for a payout of roughly $0.60, earning shareholders a potential yield of 8.6% this year.

On the downside, investors would need to be wary of geopolitical risks, on top of the usual commodity sector risks. Given that nearly half of its revenues comes from Russia and Ukraine, the company is not only exposed to a higher level of currency volatility, but also potential sanctions and trade risks.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Jack Tang 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.