The FTSE 100 index is having another slow day today, continuing its broad trend for September. Dragging it back are industrial miners, of which there are quite a few in the index. As I write, they make up three of the five biggest losers.
The biggest loser right now is Anglo American, whose share price is down by 5.3%. It is followed by BHP, which is down by 3.7%, and Rio Tinto, down by 3.3%. The others among the top five losers are construction company Ashtead and packaging provider Mondi. Much of this may change before today’s trading is over, but for now, I do find the decline in mining stocks, all at the same time, glaring. In fact, others like Evraz and Glencore, are down today too, though not as much as the others.
Why they are among the best FTSE 100 shares
I think this is a good time to buy these stocks, which have been big gainers since last year, for my portfolio. This is because the majority of the industrial metals’ prices will likely stay firm for a host of reasons including supply blockages, economic buoyancy, and public spending. This should hold mining stocks in good stead even though their share prices have risen considerably.
Also, they are among the best FTSE 100 dividend payers. Evraz, for instance, has a dividend yield of around 13% and Rio Tinto’s is close to 10%. If commodity demand stays strong, it is quite likely that they will continue to perform and retain their dividends.
Moreover, I think these stocks are a good bet against inflation as well. Inflation in the UK has risen to 3%. The Bank of England seems confident that the increase is transitory but a number of FTSE 100 companies have flagged rising costs as a challenge for them. They have also been passing on these price increases to end consumers, which can encourage further inflation. One source of these cost price pressures is increasing commodity prices, and metals are among these. It follows that if I buy metal miners, they actually gain and protect my portfolio from inflation.
Also, I like the fact that miners are far from the priciest FTSE 100 stocks. Anglo American, for example, has a price-to-earnings (P/E) ratio of 7.2 times while Rio Tinto is at 6 times. As an individual investor trying to choose across stocks in various sectors, I think these ones have a particular appeal.
Individual issues plague miners
There is, however, one hitch to them, which is that they appear to be facing unique individual issues of their own. BHP is going to delist from London, so I would not buy its stock now. Rio Tinto has had management changes in the past year, following the unfortunate destruction of ancient aboriginal sites in Australia. And Glencore is fighting corruption charges. If I am not careful, I might end up holding on to poorly performing stocks for a long time.
What I’d do
For now, however, I think — with the exception of BHP which is a separate matter — these companies’ challenges can hopefully come to some resolution, making them among the best FTSE 100 stocks for me to buy today.
