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Look at Anglo American as Some Commodity Prices Stay Perky

By Malcolm Stacey | Tuesday 9 January 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello, Share Crimpers. It’s not often I commend shares in a mining operation. And I have especially avoided talking about the very big miners. The reason is that one can never say with confidence if commodity prices are going to rise or fall. However, there are clear signs that general demand for metals and minerals is at last improving.

I’m encouraged in commending Anglo American (AAL) to your further scrutiny, after that informative bank, Jefferies, stopped treating the shares as a ‘hold’ and suggested we buy instead. At the same time, the bank's target was improved from 1500p to 2000p - or 33%. Quite a jump, eh?

It seems there is stronger demand from China. At the same time, the world’s supply of raw materials is beginning to slow. So the share trader-friendly law of supply and demand comes into play.

Anglo American has a strengthening cash position. And at the same time, the prices of copper, coal and iron have all improved and could continue to rise. It also does gold and diamonds, among others of the worlds’ riches. And though these commodities have not risen in price very much, it may soon be catch-up time.

Anglo American is mostly known for its operations in Africa. But it also has a big presence in both American continents, Europe and Australia. The big miner has also been rumoured to be a takeover target. And it has a new Chairman who the City seems to like.

The share price was as low as 1343p in December. It’s now 1627p. So it’s up by nearly a quarter in less than a month. It last hit 2000 (Jefferies’ new target) five years ago. But if the metals and minerals market is truly improving, we could be on a winner here. The Price Earnings multiple I have seems reasonable at 16.1 and the dividend is just over 3%.

See you in the Punter’s Return.

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