The FTSE 100 index has picked up speed in the past month. And this is showing up in the stock prices of individual companies as well. Like the multi-commodity miner Anglo American (LSE: AAL). In the last month alone, the stock was up almost 20% at the close on 20 Jan! It was always a good stock, but this much increase is something else, if you ask me.
My journey since buying Anglo American shares
I had bought the stock in 2021, when miners’ prices had started declining. It seemed like the perfect opportunity for me to buy the stock. It had just come-off after rising to fresh multi-year highs and in my analysis, it was quite clear that the stock could just rise more. This was shortly after forecasts for industrial metal prices were cut, as China pulled back from its massive public spending and the global economic recovery appeared uncertain too. So before it started rising, there were a few months of agonising as the stock dipped further. But then in December 2021, it started rising again and now I am sitting on some nice gains.
Comparison with Glencore
And here is the best part. I do not think the stock is done rising yet. Consider this. It is trading at a price-to-earnings (P/E) ratio of less than nine times, when the FTSE 100’s P/E is 18 times. And its peer Glencore, the Swiss miner and commodity marketer, has a P/E of a huge 38 times.
Now, there are bound to be differences in individual companies’ profiles. For instance, Glencore’s earnings and dividends are expected to rise in 2022, while Anglo American’s could slow down. Even then, though, I am not convinced there should be such a gaping difference between the two in terms of price. Also, it is always essential to remember that forecasts are always subject to change, so the outlook could change quite soon depending on evolving circumstances.
Nice dividends for the FTSE 100 stock
In any case, I think even with the expected dividend decline, the Anglo American dividend could continue to look good. At present, it has a dividend yield of 6.5%. But at today’s prices, its 2022 dividend yield would be around 4.2%. While this is a come-off from the present levels, it would still be slightly higher than the average expected FTSE 100 yield of 4.1% in 2022.
What I’d do
It is not like the stock’s price rise is guaranteed, though. The world is still in an uncertain place as far as the coronavirus is concerned. The economic recovery is a bit underwhelming, which could hold back metal prices further. And inflation is on the rise, which could slow down not just consumer demand but also growth in the stock markets, impacting all stocks as a result. But these are all risks that may or may not play out. On the other hand, I am quite confident that Anglo American will stay a growing and profit-making company. I think its prospects look good and I intend to stay invested, if not buy more of it.
Manika Premsingh owns Anglo American. 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.
