Every month, we ask our freelance writers to share their top ideas for value stocks to buy with investors — here’s what they said for June!
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Anglo-Eastern Plantations
What it does: Anglo is the owner of 76,100 hectares of palm oil and rubber crops in Indonesia and Malaysia
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By Mark Tovey. I think the best value stocks are in the misunderstood and downright disliked industries.
Palm oil – used in cooking, soap production and biofuels – fits the bill.
Anglo-Eastern Plantations (LSE:AEP) churns out around 500,000 metric tonnes of crude palm oil a year, producing £74m of free cash flow in 2022. It has £183m in net cash.
Let’s compare with an in-vogue commodity like lithium.
Nasdaq-listed Piedmont Lithium had negative free cash flow of £52m in 2022 and net cash of just £98m.
Unsurprisingly, the company with ‘lithium’ in its name is worth three times more by market cap than the palm oil maker.
In this tale of two commodities, Anglo is the winner with a rock-bottom price-to-earnings (P/E) ratio of 5.4.
Of course, Anglo is vulnerable to political risks and extreme weather events in Indonesia and Malaysia.
But I bought shares because the global demand for palm oil is growing every year. At the same time, strict zero-deforestation rules are making the industry less damaging.
Mark Tovey owns shares in Anglo-Eastern Plantations.
Antofagasta
What it does: Antofagasta owns a string of copper mines in Chile and is one of the world’s top-ten red metal producers.
By Royston Wild. Mining shares have been battered as fears over the global economy have grown. But I believe recent price falls across the sector represents a great opportunity for investors to grab a bargain.
Take Antofagasta (LSE:ANTO) for example. The FTSE 100 copper miner trades on a forward price-to-earnings growth (PEG) ratio of 0.2 following an extreme price drop since February. A reading below 1 indicates that a stock may be undervalued.
I think the company’s share price could soar over the next decade as copper demand explodes. Consumption is tipped to explode from multiple sectors including renewable energy, construction and electric vehicles. And mega-miners like Antofagasta have the scale and the financial clout to fully capitalise on this opportunity.
The business is expanding several of its assets like Los Pelambres — considered one of the largest copper resources on the planet — to drive earnings over the next decade. And it owns several exciting exploration projects dotted across The Americas (including two in Chile, which allowed the company to recently hike its stated mineral resources by 900m tonnes).
Royston Wild does not own shares in Antofagasta.
Legal & General
What it does: Legal & General provides life insurance, financial, asset management and investment services.
By Alan Oscroft. The insurance sector is down these days, and I think some stocks are great value.
With its various products and services, Legal & General (LSE:LGEN) has a wide portfolio of interests.
It’s different, for example, to firms that focus on motor insurance, or disaster insurance. Legal & General might just be one of the safest.
Forecasts put the stock on a price-to-earnings (P/E) ratio of only a bit over seven. That’s about half the FTSE 100 average. And I think it makes the firm one of the best value investments on the market right now.
There’s a tasty dividend yield on the cards of 8.2%, too.
We face a risk that the economic outlook could put pressure on profits. And that in turn could damage the dividend.
But I rate Legal & General as one of the best managed financial firms on the market. I think it’s a top long-term buy and hold right now.
Alan Oscroft does not own Legal & General shares.
Rio Tinto
What it does: Rio Tinto is a global mining group focused on iron ore, aluminium, copper, lithium, and other commodities.
By Charlie Carman. Rio Tinto (LSE:RIO) shares have underperformed the FTSE 100 this year following a hefty dividend cut and a 38% profit slump in FY22. Rising labour and material costs, coupled with sluggish Chinese demand for iron ore, are ongoing concerns.
However, I think there’s a compelling case that the stock is undervalued with a P/E ratio just above 8. After all, Rio Tinto operates in a cyclical industry, so share price volatility is par for the course.
If China can revive its ailing construction sector, demand for Rio Tinto’s commodities could receive a much-needed boost. Plus, there are further growth opportunities to exploit in emerging markets like India.
I also believe Rio Tinto is likely to benefit from the global transition to net zero. Key metals for renewable technologies, such as copper and lithium, are integral to the company’s expansion plans. Taking a long-term view, the stock looks attractively priced today.
Charlie Carman has positions in Rio Tinto.
