Key points
- Two FTSE 100 stocks for a global recovery
- The copper price is up 22% in a year
- A global pandemic recovery is on the horizon
The FTSE 100 index is made up of many strong stocks. They are among the biggest and most established companies operating all around the world. I’ve found two recovery stocks that I think will prosper in 2022, Antofagasta (LSE: ANTO) and InterContinental Hotels Group (LSE: IHG). Let’s take a closer look.
A FTSE 100 miner
Antofagasta is a FTSE 100 copper mining company operating in Chile. It also mines gold and the mineral molybdenum. Another segment is transport-focused, featuring rail and trucking activities to support the transport of metals.
This company has been profitable over the past five calendar years. It has registered a yearly average increase in profit before tax of 38%. Furthermore, its earnings-per-share (EPS) have also grown over the period.
One way to calculate whether this stock is undervalued, or not, is to refer to its price-to-earnings (P/E) ratio. This comes from dividing a company’s market value per share by the EPS. This results in a reading of 13.6, indicating the stock is slightly undervalued, because it is below the industry average of nearly 14.
With the price of copper up 22% over the past year and this metal now playing a large role in electric vehicles, the future is bright for Antofagasta, I feel. The strong performance of this stock’s underlying commodity supports my view that the company will prosper as the world reopens.
In its Q4 report for the three months to 31 December 2021, however, Antofagasta reiterated its forecast for declining copper production. This is due to the drought Chile is experiencing. Nonetheless, the company stated that a desalination plant will be operational for the second half of 2022 to assist with the water shortage.
A global recovery play
With the world now emerging from the nightmare of the Covid-19 pandemic, an interesting FTSE 100 recovery stock could well be InterContinental Hotels Group. This company owns many well-known hotel brands, including Crowne Plaza and Holiday Inn. It operates globally.
The business environment for this sector is improving as we leave the pandemic behind. Indeed, the less severe Omicron variant appears to have paved the way for a global recovery and this prompted Jefferies to state in November 2021 that “higher internet searches and web traffic” indicate a “recovery in US hotel footfall”. This could be the first of many positive news reports.
In spite of this positive news, its EPS declined in 2020 because of the pandemic. The normally profitable company recorded a $280m loss. In the report for the three months up to 30 September 2021, room revenue was still down 21% for the same period in 2019. However, I believe these difficulties are already factored into the current price. Indeed, compared with the 2020 period, room revenue is up 66% and I expect these figures to keep improving.
These two stocks will prepare me for a global reopening. I won’t be wasting any time before I add them to my portfolio. With a bright future for copper and a global recovery hopefully around the corner, I think these FTSE 100 stocks could perform very well indeed.
Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended InterContinental Hotels Group. 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.
