Though the mining of precious metals is vital for producing jewellery, the mining sector is not an especially glamorous one. Us investors shouldn’t care too much though – as long as we’re making money. When searching for bargain stocks, investors often overlook FTSE mining stocks. Here’s why you might want to consider buying mining stocks:
They allow you to hedge your portfolio against inflation and uncertainty
You may already have a diversified portfolio of well-picked stocks, but if there’s market uncertainty, those shares might lose a lot of value. Gold has – for a long time – been the top pick for inflation hedgers. But I think the miners themselves are likely to benefit even more.
They can pay healthy dividends
If you’re looking for a source of income, dividend-paying shares can provide an alternative to the pitiful returns of government bonds. Always research the company first though, to be sure the dividend stream won’t dry up.
You can benefit from central bank money printing
The Bank of England, alongside many other central banks, is printing massive quantities of money to keep the economy going. Where is all this new money going? Assets. And when there’s more cash but the same amount of metal, that metal is going to be worth more. Good news for the FTSE mining stocks – and it could be good news for you too.
Which FTSE mining stocks are looking good?
Centamin is trading at 149p. Its price has fallen since the US released rosy-looking jobs data – suggesting more people were back in work than had been let go. But that doesn’t change the fundamentals. In fact, at this lower price, the dividend yield is even more appetising. Even better, Centamin announced last month that operations in the Egyptian Sukari mine were unaffected by coronavirus. We’ve already seen the shares go past 190p, so there’s great upside potential.
Other great FTSE mining stocks include Anglo American, which produces platinum and other metals and minerals needed for industry. It is currently selling around 8.5 times earnings, with a current ratio just under 2. EBITDA has increased consistently since 2015. The company has trimmed the total number of mines it operates and cut costs – yet still managed to increase revenues. These improvements in cost control and productivity, along with better prices have raised profits and cash generation. Debt’s down too, from $12.9bn in 2015 to $4.4bn today. The stock has risen by 36% in the last month though, so it’s not as good a bargain as it was!
Copper company KAZ Minerals focuses on large scale, low cost, open pit mining in Kazakhstan, Russia, and Kyrgyzstan. Like Anglo American, KAZ Minerals restructured – and has performed impressively since 2014. Unlike other mining companies, Kaz Minerals focuses primarily on copper mining. Diversification within the mining sector would be beneficial to your portfolio, and this stock could help with its strong focus on a vital industrial metal like copper. Like Centamin, the group’s operations have been largely unaffected by Covid-19. Management are leaving production targets for the full year unchanged.
I think all these FTSE mining stocks have potential to keep going up if the economic recovery holds. So have a look, do some digging, and mine yourself some nice profits.
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Toby Aston has no positions 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.