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These 2 FTSE 100 stocks have doubled in a year! I’d still buy them

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FTSE 100 stocks aren’t all slow-growing, lumbering blue-chip giants. Sometimes their share prices can go gangbusters. Take London-listed global miners Anglo American (LSE: AAL) and Glencore (LSE: GLEN). They are up 132% and 125% respectively over the last year. That’s pretty punchy growth. But should I invest in them at today’s higher prices?

The commodities and natural resources sector has been the year’s top performer, with an average return of 116%, according to the Association of Investment Companies. This sector is famously cyclical, and that remains the case today. In the previous two years, it posted negative returns. The danger with buying these two FTSE 100 stocks is that the big gains have been made.

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Mining stocks have been flying as investors anticipate a surge in demand once Covid vaccines do their work. They can also act as a hedge against inflation, as commodity prices tend to rise when prices generally are accelerating.

Green light for commodity stocks

US president Joe Biden’s $2trn infrastructure plan should boost demand for raw materials, while the 18.3% rise in Chinese GDP is a further positive sign. The green revolution should boost demand for copper, which is now trading near all-time highs.

Anglo American should benefit from its broad portfolio of materials. It is the world’s largest producer of platinum, but also mines diamonds, copper, nickel, iron ore and metallurgical and thermal coal.

That helped make it the best-performing FTSE 100 mining stock over five years, up 365% in that time, easily beating Glencore’s 91% five-year return. It has been generating plenty of cash, which has allowed it to pay off $2bn of net debt, reducing it to $5.6bn. 

Anglo American aims to pay out 40% of profits to shareholders, and recently lifted its net dividend by 53% to 72 cents a share. Right now, it yields 2.32%, but that is forecast to rise. My major concern is that rivals Rio Tinto and BHP Group could now outperform, as they will benefit more from surging Chinese demand for iron ore and copper, key components for electric vehicles. Anglo American owns De Beers, but diamond sales have been falling.

I’d buy these FTSE 100 stocks today

Glencore also offers diversification, mining copper, cobalt, nickel, zinc and lead, aluminium, iron ore, gold and silver and crude oil. It has the largest exposure to base metals and copper of all the London-listed miners, totalling 40% of EBITDA earnings.

The Glencore share price has been more volatile. Net debt hit $30bn in 2015, forcing it to shelve dividends, sell assets and raise fresh equity. It has now reduced that dizzying total to $15.84bn. That’s within its $10bn to $16bn target range, allowing it to resume its dividend. The yield is 2.66%. That should rise.

My biggest concern is that these FTSE 100 stocks no longer look undervalued, trading at 17.2 and 27.9 times earnings respectively. If the recovery flounders, they will too. However, if they meet earnings expectations, all should be well as they trade at forward valuations of just 7.1 and 9.7 times earnings. I’d buy them today.

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Harvey Jones 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.

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