These two FTSE 100 stocks are on the rise – is now the time to buy?

As the mining sector enjoys a boost from China, this Fool UK contributor has his eye on two promising FTSE 100 stocks.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Anglo American plc

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

China has hit the global mining industry with a surprise – a sudden increase in manufacturing that demands fresh raw materials from around the world. As a result, major mining companies have enjoyed a sudden uptick in production, prompting investment giant UBS to flip two major mining-related FTSE 100 stocks from ‘neutral’ to ‘buy’.

These two companies are Anglo-American (LSE: AAL) and Antofagasta (LSE:ANTO), both of which enjoyed a surge in share price last week when the news broke. I’m investigating whether the price increases will be short-lived or if these shares still have some room to grow.

Anglo-American

Anglo-American is one of the largest mining conglomerates in the world, with a strong presence in South Africa and a focus on diamonds and platinum. Founded in 1917, the London-based firm employs 90,000 staff in 15 countries worldwide.

Should you invest £1,000 in Anglo American right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Anglo American made the list?

See the 6 stocks

The buy signal from UBS is a positive indicator, but I’m digging deeper to discover if the company has long-term growth potential. With almost double the amount of assets as liabilities, Anglo-American’s debt-to-equity (D/E) ratio of 45.3% is reassuring — although this is higher than five years ago. Still, I think the future looks promising for Anglo-American, with earnings forecast to grow by 15.4% per year and deliver a return on equity above 10% in three years.

Impressive numbers – but there are some red flags.

Anglo-American’s profit margins in 2023 are significantly lower than in previous years, and from what I can tell the company may struggle to cover its dividend yield of 4.4% with current cash flows. However, these statistics may improve if increased manufacturing continues to push up prices. In the short term, I think Anglo-American has some decent growth potential, but I’ll look for consistent improvement before I can be assured of long-term gains.

Antofagasta

Headquartered in London, Antofagasta is a multinational mining company founded in the late 1800s. Originally a railroad project carrying copper between Bolivia and Chile, it now runs several mining operations worldwide.

With a market cap of £14.4bn and earnings of £1.6bn, Antofagasta’s price-to-earnings (P/E) ratio is 11.5x – high enough to suggest positive sentiment while still below the three-year UK mining industry average of 23x. I believe this puts it in a good position to outperform expectations in the coming year. Even with the recent price rise, some analysts estimate Antofagasta to be 15% below its fair value, with revenue forecast to grow by nearly 8% per year.

However, this sudden price rise is no guarantee of continued growth. Long-term analysis has forecast Antofagasta’s earnings to decline by 1.3% per year over the next three years, with earnings per share (EPS) to decline by 0.9%. So long as China continues its manufacturing spike, I think Antofagasta has good short-term potential. However, I’ll keep a close eye on its financials over the coming months before making any long-term decisions.

Should you buy Anglo American now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Mark David Hartley 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.

More on Investing Articles

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

Worried about the future of the Cash ISA? Consider investing like this for potentially great returns

The Cash ISA is tipped for massive changes in the coming months. This could provide fresh opportunities for savers, says…

Read more »

Investing Articles

£20k across this FTSE 100 share and ETF would have more than DOUBLED in just 5 years!

Looking for ways to supercharge your stocks portfolio? Consider a lump sum investment in this FTSE 100 share and this…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Just released: our 3 top small-cap stocks to consider buying before March [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

As the British American Tobacco share price drops 10%, should investors buy the dip?

A share price slump has pushed British American Tobacco's dividend yield over 8%. Should investors consider buying this FTSE 100…

Read more »

Investing Articles

Prediction: this investment trust will easily outperform the FTSE 250

Our writer shines the spotlight on a FTSE 250 investment trust that he thinks looks set up for strong long-term…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Should I buy more BAE Systems shares for my Stocks and Shares ISA?

This investor in BAE Systems shares takes a look at the FTSE 100 defence firm's annual results to decide if…

Read more »

Investing Articles

Does this news mean a fresh start for the Centrica share price?

The Centrica share price has gone nowhere over the last year. But the stock has spiked following strong results and…

Read more »

Investing Articles

2 UK dividend shares that aren’t what they seem

Investors need to look carefully when it comes to dividend shares. Sometimes the actual yield can be higher or lower…

Read more »