As a value investor, I am always on the look-out for cheap stocks to add to my portfolio. On the face of it, Tullow Oil (LSE: TLW) looks like a good candidate. Its share price is down 75% over the past five years. However, the primary commodity it produces, oil, has been soaring during the past year. So, has the market completely under-valued the company’s potential? Let’s delve a little deeper.

A heavily-indebted business

Tullow Oil is a company that has been in trouble long before the pandemic struck. In 2019, the Africa-focused business reduced its production guidance due to drilling problems. When the pandemic struck, it was forced to take significant impairments and exploration write-offs totalling $1.2bn. At that time, its net debt stood at $3bn, resulting in a gearing ratio of three times.

This matters hugely, as in order to secure a debt refinancing package with its creditors, in May 2021 it was required to hedge the price of oil in order to stabilise income. In 2022 and 2023, 75% of its sales volumes have a ceiling price of $78 and a floor price of $51. In 2024, this will be reduced to 50% of sales.

This turned out to be terrible timing for the business, as oil prices have surged over the past six months and are now well in excess of $100 a barrel. Given the hugely cyclical nature of the oil industry, there is no guarantee that prices will remain elevated beyond 2024.

Longer-term prospects

When a share price falls 95% over an extended 10-year period, that raises alarm bells for me. It could be because the wider industry is in decline (a factor clearly not present here). It could be attributed to the fact that the company possesses a dwindling asset base. Or it could simply be a poorly run business. However, the company was able to survive the worst crisis to hit the industry in 30 years.

Tullow’s key assets in Ghana, the Jubilee and TEN oil fields, have significant oil reserves. The Jubilee field in particular saw production rise 29% throughout 2021 as new wells were bought onstream. To date, only about half of its expected reserves have been produced. There is also significant development work just outside Jubilee. There, the company’s estimated ultimate recovery is 170m barrels of oil, of which only 10% has been produced to date.

With the successful refinancing of its debt complete, the company’s immediate cash flow problems look behind it. It intends to use the raised cash for working capital purposes. This includes a capital expenditure allowance of $350m to maximise the value from the Group’s producing assets, as well as exploration activities.

Is Tullow Oil a buy?

Although it has a number of high-growth, short payback projects in the pipeline, it is very difficult for me to look beyond the immediate headlines. Revenue, total production, and realised oil prices were all down on 2020. And this is all set against a wider commodities industry that is enjoying something of a renaissance.

Net debt only fell by 12.5% and stands at $2.1bn. That is two times the market cap of the firm. With the oil price hedge in place for another two years, I just can’t see revenues moving upward significantly from here. Therefore, I won’t be buying.

Andrew Mackie 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.

So what is James Fisher & Sons (LSE: FSJ), and why did the FTSE All Share stock fall 20% on Thursday? And why does it make me sit up and think it might be a share to buy right now?

The price dip came after 2021 full-year results. The company is in the marine services business, which has been under pressure. For 2021, Fisher & Sons reported a statutory loss before tax of £29m. But I think that headline figure hides a company with attractive long-term potential.

Covid-19 hit the FTSE sector hard. Chief executive Eoghan O’Lionaird said that “2021 was a challenging and disappointing year for the group. We experienced ongoing disruption from the global pandemic, our markets did not recover at expected rates, and we underestimated the headwinds faced by some of our businesses“.

I do like it when a CEO tells it like it is and doesn’t try to sugar coat bad news with waffly marketing speak.

Better than it seems?

There’s one thing that immediately makes me think things might not be as bad as they seem. The reported loss for 2021 covered a number of one-offs. Excluding those produces an underlying operating profit of £28m.

I know it can be risky relying on underlying figures. FTSE companies report them all the time, and some turn out to be more reliable than others. Who knows what other one-offs might hit the current year?

But it does at least make me think there’s a potentially healthy operating environment here, if Fisher & Sons can get past its rough few years. It just might be a good time to buy right now.

A FTSE recovery stock?

For Fisher to be a good investment for the medium term and beyond, it will first need to survive its short-term crisis. So what does the balance sheet look like? Well, there is significant debt on the books. But it is heading in the right direction.

At the end of 2021, the firm was saddled with £185.6m in net debt. For a FTSE company with a market cap of £195m, that’s a lot. But that figure does include finance leases and right of use liabilities. Actual bank net borrowing comes in at a less painful £139.6m.

And the total figure is £12.5m better than the previous year, which ended with net debt of £198.1m. Bank net borrowings are notably lower than 2020 too, down from £165.6m.

Buy right now?

The difficult question is how to put a valuation on the Fisher share price right now. Thought the results day fall is painful, it’s really only giving up some of the stock’s 2022 recovery. The shares have lost 56% over the past 12 months, while the FTSE All Share is down a modest 3%. But Fisher is still up 35% since a 52-week low in December.

To summarise, I am definitely seeing a risky investment here. Another “challenging and disappointing year” could result in a further share price collapse. But if the company can get back close to pre-slump earnings levels, we could be looking at a price-to-earnings multiple in low single digits.

Does that make it a share to buy right now? It’s definitely on my list for my next investment.

Alan Oscroft 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.

Russian mining companies on the London Stock Exchange have been hit hard by the risk of sanctions. Today I want to look at three LSE shares that have each fallen by around 80% over the last month.

Evraz: suspended

Coal and steel group Evraz (LSE: EVR) said on Wednesday that it didn’t believe it should be affected by UK sanctions against Russia.

Even so, Evraz’s board then decided to cancel the interim dividend it had declared on 25 February.

On Thursday morning, things got really serious. The government added Roman Abramovich, the company’s largest shareholder, to the UK’s sanction list. Evraz shares were suspended from London trading.

I can’t emphasise enough how quickly things happened. I saw the news about Abramovich at 10.48 on a newspaper’s live news page. At 11am, the London Stock Exchange suspended Evraz shares.

What happens next? Evraz shareholders won’t receive the March dividend. Although UK shareholders will continue to own the stock, they can’t sell it.

Evraz shares might return to trading at some point. Personally, I think a more likely scenario is that the company’s LSE shares will be cancelled. This would probably leave Evraz shares listed on the Moscow Stock Exchange only.

If this happens, I’d guess that most UK shareholders would be unable to sell and would have to write off their investment.

Polymetal: LSE shares at risk?

Will gold miner Polymetal International (LSE: POLY) follow Evraz into suspension? 

The company said on Wednesday that it “doesn’t consider itself” to be owned or controlled by Russian shareholders. I looked at Polymetal’s ownership in more detail here.

Polymetal’s management say that sanctions have had a limited impact on its mining operations and sales. But they’ve warned that financial restrictions could affect future dividend payments and limit access to bank facilities.

The board declared a final dividend for 2021 on 2 March. They haven’t cancelled it yet. But Wednesday’s statement included a reminder that the board “retains the discretion” to withdraw its dividend recommendation ahead of the group’s AGM on 25 April.

What happens next? I think Polymetal is likely to cancel its dividend to preserve cash.

I also suspect the company will find it easier to operate normally under sanctions if it withdraws from western financial markets. For this reason, I expect Polymetal to cancel its LSE share listing at some point.

Will POG shares be suspended?

Gold miner Petropavlovsk (LSE: POG) said on Wednesday that events in Ukraine had not interrupted its operations in the Far East of Russia. However, the company admitted that some of its Russian shareholders “may be restricted” under sanction regulations.

Having taken legal advice, Petropavlovsk says that it does not believe its LSE shares should be affected by sanctions. This is because its Russian shareholders control less than 50% of the company’s stock.

What happens next? POG shares rose following yesterday’s news but are down today. If operations remain unaffected then this stock could be very cheap, on less than two times 2022 forecast earnings.

However, buying POG shares looks like a big gamble to me. This company sells its gold within Russia and might choose to list domestically. Tighter sanctions could force a share suspension or delisting. Petropavlovsk is too risky for me to buy.

Roland Head 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.

The Spirax-Sarco Engineering (LSE: SPX) stock is popping today, with an increase of almost 4% from yesterday’s close. As I write, it is the fastest rising FTSE 100 stock. It is even making a lot of news. As someone who has been watching the Spirax-Sarco share price for a while now, this looked like a good time to explore what is going on with it.

Spirax-Sarco share price rises on results

The company released its results earlier today, which have clearly pleased investors. Its revenue is up some 13% in 2021 and its earnings per share are up by 35%. Its dividends have also risen by 15%. 

Its net debt to EBITDA, which is short for earnings before interest, taxes, depreciation, and amortisation, is down to 0.35 times. By comparison, the number was at 0.7 times last year at this point. Even last year’s number is not worrisome, but the fact that it has halved from even there is good news indeed. 

The company is also largely positive about its prospects for the current year. It expects organic sales to grow at rates “well above” those for global industrial production, whose increase has ranged between 4% and 4.4% in 2022 so far. It also expects the adjusted operating profit margin to remain “comfortably above pre-pandemic levels” in 2022. 

High valuations for the FTSE 100 stock

It is not all roses here, though. The big stumbling block I face when considering investing in the Spirax-Sarco Engineering stock is its valuation. It has a price-to-earnings (P/E) ratio of 40 times right now, and it does not help that it is the most highly priced FTSE 100 stock even in absolute terms. 

I could also look at its price-to-sales (P/S), considering that it is a growing company, but even that is higher than that for its global peers at around 6.5 times. In other words, whichever way I look at it, the stock looks pricey to me. 

Its high valuation could be justified if it were a classic defensive like healthcare or utility stocks. But that is not the case. It is linked to global industrial production, which by its very nature is a cyclical economic activity. 

What I’d do

Yet, I cannot help but notice that over the past five years, the Spirax-Sarco share price has almost tripled. And this is after it has seen a huge correction since late last year. If this correction had not happened, its share price would have quadrupled in five years. 

That it has seen fast growth is also evident in the fact that when I first wrote about the stock in 2019, it was part of the FTSE 250. Now it is the most expensive FTSE 100 stock. Clearly, it is doing something right. 

As things stand, however, I would put it on my investing watchlist right now, when there is a fair bit of economic uncertainty around. But I would like to dig deeper into this stock to figure out if there is anything I am missing here. It might just change my mind!

Manika Premsingh 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.

Since January, we have witnessed a mini tech crash, inflation pressures, and the invasion of Ukraine. For investors, a volatile period like this can be stressful. But with the FTSE 100 down over 5% this year, I think it is a great time to finally invest in those premium blue-chip stocks that always seemed too expensive. Here are the two picks that I’d add to my portfolio in a heartbeat.

British industry leader

Blue-chip stocks are generally the biggest and most consistent and reputable companies listed on an index. These companies usually have a huge market share and a strong history of investor returns. And in the past decade, Diageo (LSE:DGE) has embodied this better than most FTSE 100 companies.

The global alcohol giant owns huge names like Johnnie Walker and Guinness and has leveraged recent revenue to acquire huge local names across emerging alcohol markets. Sales have increased steadily year-on-year and the excess cash has been reused effectively. Diageo recently announced a £4.5bn share buyback to be completed by 2023.

Strong sales growth in China and India means the company now expects to add over 10mn loyal customers by 2030. Diageo also launched a US$75m carbon-neutral distillery project in China last year. I think this Asia push could allow the brand to sustain its current global dominance.

Diageo is currently trading at 3,432p, down 16% since the start of this year. Looking at the share price movement from the pandemic lows to the recent all-time high of 4,030p in December 2021, I think Diageo shows strong recovery potential.

Growing risk of regulation is the biggest concern for the alcohol sector right now. Health taxes could cripple the booming alcohol market which would affect its sales directly. Despite this concern, I think Diageo’s business plan and market share will help it retain its position as one of the most reliable FTSE 100 shares over the next decade as well. This is why I am planning on purchasing Diageo shares if it dips further.

Brand value

Consumer goods brand Unilever (LSE:ULVR) is the next blue-chip FTSE 100 share I’d buy right now. Much like Diageo, the UK giant owns a host of popular brands in its segment like Dove, Lipton, and Vaseline.

With growing inflationary pressures, I would like to add companies with pricing power, like Unilever, to my portfolio right now. If a company can pass on some of the excess costs to its consumer without losing a major chunk of sales, it almost ensures revenue growth even during turbulent periods. Unilever recently streamlined its operations and this move is expected to save about €600m over two years, which will fund its marketing and R&D wings. I think this will give it a long-term edge over smaller competitors who will struggle to offset revenue losses.

Going forward, the company expects 2022 sales growth to be between 4.5% and 6.5%. Given that this rate of growth is not earth-shattering, there is a risk of share price stagnation. Investors could opt to invest in more exciting sectors which would affect Unilever’s price action. The brand also faces stiff competition from the rise of generic alternatives and discount retailers. But being a well-established FTSE 100 consumer goods giant, I think Unilever is well placed to handle market volatility, which is why I think it is a prudent recovery play for my portfolio now.

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Unilever. 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.

Key points

• Both firms released a statement yesterday that they did not expect to be targeted with sanctions and that operations continued uninterrupted
• For 2021, Polymetal’s gold production increased, while Petropavlovsk’s declined by 17.9%
• Polymetal has a lower trailing P/E ratio, suggesting it may be better value 

With the recent military situation between Russia and Ukraine, many firms operating in the region saw their share prices collapse in a matter of days. Two of these companies are Polymetal International (LSE:POLY) and Petropavlovsk (LSE:POG). In the past month, their share prices are down 85% and 75% respectively. Over the year, they have fallen 89% and 86%, currently trading at 140p and 2.95p. As both mine gold, I want to compare these businesses to see which is a better buy for my portfolio. Should I add to my current Polymetal holding, or buy Petropavlovsk shares instead? Let’s take a closer look.  

Recent results: Polymetal and Petropavlovsk share prices

Investors have rapidly sold shares in both companies out of fear that sanctions will target the firms. On 9 March 2022, however, each business released a statement outlining their shareholder structures. This sought to clarify that none of the major shareholders were linked to the Russian regime.

Consequently, the firms do not expect sanctions to target them under the Russia (Sanctions) (EU Exit) Regulations 2019. I find these statements reassuring given the current tensions.

In this sense, Polymetal may have the edge. The company was quick to point out that Kazakhstan operations actually generate 48% of its net earnings. Furthermore, its gold production increased from 1,637,000 ounces to 1,677,000 ounces between the 2020 and 2021 calendar years. Petropavlovsk, on the other hand, saw its gold production decline by 17.9% over the same time period. Despite this, both of these companies continue their gold mining and production uninterrupted.

Historical comparison: which is better value?

Polymetal’s revenue between the 2017 and 2021 calendar years grew from $1.61bn to $2.89bn. In addition, earnings per share (EPS) increased from ¢70 to ¢188. Investment in this company comes with risk, however, and the ongoing conflict in Ukraine may continue to negatively impact the Polymetal share price.

Meanwhile, Petropavlovsk’s revenue grew from $540m to $988m between the 2016 and 2020 calendar years. Furthermore, EPS declined from ¢1 to −¢1 over the same period. Both of these companies therefore exhibit consistent revenue growth, but Polymetal has a definite edge in terms of historical EPS. 

A comparison of trailing price-to-earnings (P/E) ratios may also indicate if one firm is better value than the other. Polymetal has a trailing P/E ratio of 4.6, while Petropavlovsk’s is 12.85. This would suggest that Polymetal is more of a bargain at current levels. It should be noted, however, that P/E ratios may lose their accuracy in light of recent share price collapses. 

Based on this analysis of earnings, revenue, and P/E ratios, it appears that Polymetal is better value. Given the rapidly evolving military situation in Ukraine, however, I think I’ll wait for more news on the conflict before increasing my current position. 

Andrew Woods owns Polymetal International. 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.

As a long-term stock investor I don’t fear the sort of wild market volatility we’re currently witnessing. It widens my options when I’m searching for the best cheap UK shares to buy.

I’ve explained in some depth why housebuilding shares — including those I personally own — should remain great stocks to buy. And today another round of positive data has reinforced my belief in the strength of the housing sector.

The latest Royal Institution of Chartered Surveyors (RICS) data shows that the UK homes market continues to strengthen, despite recent interest rates hikes, the cost of living crisis, and the recent withdrawal of the stamp duty holiday. Some 79% of surveyors RICS questioned saw house prices increasing in February, up from 74% a month before.

Improving market conditions

RICS also said that the number of new buyer enquiries rose in February for six months on the trot too. So it’s perhaps unsurprising that RICS chief economist Simon Rubinsohn has said that “there is little evidence yet that the mood music regarding the expectations for house prices or rents is shifting.”

Rubinsohn added that “the medium-term projections from respondents to the RICS survey are continuing to gain momentum.” This is despite the huge uncertainty facing the UK economy and suggests that bulking up my exposure to the housebuilding sector is a good idea. I’m thinking of doing this by snapping up Vistry Group (LSE: VTY) shares.

8.4% dividend yields

One of the main reasons why I bought housebuilders Barratt and Taylor Wimpey was their bright dividend prospects. Their exceptional cash generation made them ideal buys for me as I’m seeking a healthy passive income. It gave them the financial strength to remain generous dividend payers even when times got tough.

The pull of big dividends is what’s attracting me to buy Vistry Group today too. City analysts think the substantial 60p per share payout will continue growing in the next two years (to 74.6p and 79.3p in 2022 and 2023 respectively). Following recent share price weakness these projections create massive dividend yields of 7.8% for this year and 8.4% for 2023.

A cheap UK share to buy today

Vistry’s share price has been washed out amid the broader market volatility of recent weeks. The housebuilder just fell to its cheapest since February 2021. And I believe this provides a brilliant all-round dip-buying opportunity.

Vistry doesn’t just offer big dividend yields at its share price today at around 955p. City analysts think the firm’s earnings will rise 11% year-on-year in 2022. As a consequence the share price now commands a rock-bottom forward P/E ratio of just 6.8 times.

Shares like Vistry aren’t without risk of course. If the Bank of England adopts a more aggressive rate-rising programme then demand for its homes could suffer. Vistry and its peers also face the problem of rising building material prices on their profits. Still, I think this particular housebuilder’s ultra-low valuation more than reflects these dangers. Vistry is a bargain share I’d buy to hold for years to come.

Royston Wild owns Barratt Developments and Taylor Wimpey. 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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There’s been a bear market going on for many US and UK stocks over several months. And that’s been particularly true for over-valued tech and growth stocks and for many British small-cap companies.

However, those just watching the major indices here in the UK such as the FTSE 100 might not have realised it. Indeed, the weakness in the stock market has been happening under the surface. And it’s been showing up most in individual investors’ portfolios.

A news-driven market

Issues arising from the pandemic caused some of the problem in the markets. For example, supply chain constraints and rising price inflation served to put a question mark over the sustainability of economic growth.

And the tragic war in Ukraine has accelerated the declines for many UK stocks. However, companies in the resources sector — such as miners and oil companies — have seen their stocks rise in many cases. And much of that movement has been due to rising commodity prices, such as copper, nickel, iron ore, oil and others.

Meanwhile, in the short term, the stock market looks like it’s being driven mainly by news flowing from the situation in Ukraine. And yesterday (Wednesday 9/3/22) was a good day for many stocks in the UK. Indeed, my screens lit up with blue as share prices bounced up by robust single-digit percentages in many cases.

So far, today is shaping up to look a little weaker for stocks. And that suggests the volatility looks set to continue. But I reckon yesterday’s price action demonstrates how responsive the market will likely be to any improvement in the news flowing from Eastern Europe.

For example, any announcement of an end to hostilities could see an even bigger bounce higher on the markets. And I think that will be justified because the war is perhaps artificially depressing stocks right now. It’s possible the stock market’s gloomy stance overstates the potential damage that underlying businesses will suffer from the hostilities.

Investing now for the long term

Longer term it will likely take time for the world, its economies and businesses to digest the changing geopolitical and economic landscape. And things will probably not be as they were before. However, I have faith that businesses will adapt to the new realities. After all, they’ve coped with changes before, such as those caused by the pandemic.

For me then, it is a good time to buy UK shares. There are ongoing risks to owning stocks, of course, but that’s always true. And that’s why we have the popular aphorism that stock markets always climb a wall of worry. But the long-term record for stocks overall is good.

And I’ve got to ask myself the question, would I rather invest in UK shares now, when valuations are potentially depressed. Or would I rather invest in a raging bull market when valuations are excessive? Those investing into growth and tech stocks near their highs last year may have a good answer for me!

Meanwhile, my tactics now involve dripping money into UK shares I’ve selected carefully with the aim of holding them for the long term.

Kevin Godbold 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.

Is it time for me to buy cheap, unloved mining shares? That’s the question I’m looking to answer. With commodity prices reaching new highs, mining companies could see a boost to their bottom line.

There are several listed in the FTSE 100, and many are highly cash-generative and well-run businesses. But some offer far less risk than others. So where would I invest a spare £1,000 today?

Mining shares : my top pick

I’d start with mining giant Rio Tinto (LSE:RIO). It’s the largest of the mining shares and with a market capitalisation of £95bn, it’s among the biggest companies in the FTSE 100.

A few months ago, I included it in my ‘top dividend shares with growth potential’ list. It’s up by 20% since then. But I reckon that’s just scratching the surface. Rio looks like it has several tailwinds in its favour.

Some 75% of its earnings are related to iron ore, which is used to make steel. Prices for this core metal are rising. It’s being supported by Chinese steel demand that’s showing signs of a rebound.

Looking forward, Australian bank Macquarie expects infrastructure spending to accelerate as China sets its economic targets this week.

While demand for iron ore is rising, it’s being met with constrained supply, particularly in Ukraine which is the fifth-largest exporter.

Quality business

With such a supportive backdrop for iron ore and a price-to-earnings ratio of just 8x, Rio shares look relatively cheap. Its near-50% operating margin and a return on capital employed of over 30% suggest business quality. Lastly, its market-leading 9% dividend yield is the cherry on the cake for me.

A word of warning though. The mining cycle is known for its booms and busts. So, although the current environment looks supportive for mining shares, that won’t always be the case. I’d be keen to buy Rio shares right now, but I have to be prepared for volatility.

Another top mining share?

Anglo American (LSE:AAL) is another mining share that appears to offer strong cash-flow generation, double-digit profit margins, and a single-digit price-to-earnings ratio. It certainly looks relatively cheap to me.

With a market capitalisation of £50bn, it’s around half the size of Rio Tinto. Its 5% dividend yield is also a fraction of Rio’s. So why might I want to buy Anglo American shares? Whereas Rio is focused on iron ore, Anglo produces a more balanced mix of metals. Its earnings are spread more broadly across iron ore, platinum group metals and copper.

Currently, growing demand added to constrained supply is pushing up the price of all of these metals. I reckon this should bode well for Anglo American shares. Bear in mind though, that metal prices could one day become too expensive for the economy, and it could lead to lower demand and an economic slowdown.

That said, I’ve come to the conclusion that I’d buy both of these mining shares. I reckon the upside far outweighs the downside right now. One day my view may change, but for now I’d be happy with both.

Harshil Patel 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.