Equity markets have been a bit of a snooze in the past few days, with the FTSE 100 making sideways movements. Understandably, this is hardly an inspiring time for fresh investment decisions. But some companies are sure looking attractive right now!
Recently, I talked about gold miner Randgold Resources, which makes for a great defensive play in the event of an economic slowdown. But even otherwise, there are other interesting mining companies around. Case in point being the multi-commodity miner, Anglo American (LSE: AAL), which has a lot going for it right now too!
Strong financial health
First things first: the company’s fundamentals are solid, with much potential to provide great returns to investors moving forward. Both its revenues and profits are strong and growing. In its last results update, Anglo American also showed reduced debt, which is positive for its long-term financial sustainability.
I like the fact that the company has been able to keep debt contained, despite its recent investments. Most recently, its subsidiary acquired complete control over a South African platinum joint venture by buying out the other stakeholders. Anglo American also invested in a copper project in Peru a few months ago. These purchases have been balanced by selling off interests in other projects.
If you are an investor looking at the dividends, there is positive news here as well. Anglo American has also improved its dividend per share compared to the previous year by a little over 2%.
Dips are buying opportunities at attractive valuations
It is little wonder then, that its share price has significantly outperformed the FTSE 100 index. While the latter is currently at a value lower than that during the same time last year, the former’s share price has risen 25% higher, on average, in November so far.
Admittedly, it is a more volatile stock than the FTSE 100 index, but it is for this reason itself that I believe it should be considered. Higher volatility means that dips are sharper for this stock than the index as a whole as well. This allows for good buying opportunities at such times as right now, since the Anglo American share price has been softening steadily for much of November so far.
But the icing on the cake is really that the price to earnings (P/E) ratio for the company, at 9x, is much lesser than that for peer companies like BHP Bilton, Antofagasta and Fresnillo! It bears mentioning, though, that it’s trading at valuations similar to Glencore and Rio Tinto, but there is almost no company with a significantly lower P/E ratio than Anglo American. In other words, this stock is available at a lower price relative to a number of peers.
I recommend buying Anglo American shares today, if you can stomach short-term volatility in favour of good long-term results!
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Manika does not own any shares mentioned in this article. The Motley Fool UK has recommended Fresnillo. 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.