Is Polymetal a bargain compared to its competitors or are there better options out there? Let’s explore.

Will FTSE 100 mining stocks go higher?

Three Footsie mining stocks on my watchlist have made flying starts to 2022.

The Anglo American (LSE: AAL) share price climbed 34% following a $12bn increase in operating profit and a $1.7bn net debt reduction. Over a third of the miner’s 2021 EBITDA came from platinum group metals. Looking ahead, the company should prove resilient to geopolitical uncertainty. Anglo American, which is up 33% in a year, operates on six continents and has no Russian presence, unlike Polymetal.

Antofagasta (LSE: ANTO) is also racing ahead of the Polymetal share price, rising 22% this year (but down 10% over 12 months). As copper mining is the lifeblood of this Chilean multi-national’s business, shareholders will be encouraged by Goldman Sachs‘ 12-month copper price target of $13,000 per tonne. Antofagasta can build on a robust financial position after earnings per share rocketed by $87.80 last year.

Rio Tinto (LSE: RIO) stock completes the trio — it’s up 25% in 2022, but only up 4% in a year. Iron ore production accounts for almost 78% of its underlying earnings. In 2021, Rio Tinto generated +60% net cash and ordinary dividends per share rose 71%. Moreover, China’s iron ore imports remain stable in 2022, despite its economic slowdown. This is good news for the Rio Tinto share price.

With global interest rates rising, metal prices and mining stocks may fall so all of these shares come with risks. However, I believe the metals bull market could just be beginning as production seems unlikely to meet demand. For me, the outlook remains positive while supply side issues persist.

Will the Polymetal share price go lower?

Polymetal’s focus is precious metals, particularly gold and silver. It has operations in Russia and Kazakhstan. Although it consistently increased production over five years, the share price has been hurt by liquidity troubles caused by sanctions on Russian banks.

In further worrying signs, Polymetal postponed its decision on its 2021 final dividend payment. And Deloitte recently resigned as its auditor, threatening its London Stock Exchange listing.

Arguably, the stock’s substantial decline and a dirt cheap price-to-cash-flow ratio of 1.4 mean the risks it faces are priced in. Nascent plans to separate its Kazakh assets from the rest of the business lifted the Polymetal share price somewhat in recent days.

Nonetheless, I’m pessimistic about Polymetal shares. Headquartered in Cyprus, it avoided direct sanctions like those levied on Roman Abramovich’s Evraz. In a rapidly evolving situation, this could change.

The mining shares I’d buy now

Exposure to metals plays an important role in my diversified portfolio. I’m impressed by all three FTSE 100 stocks on my watchlist. They have strong balance sheets and are collectively spread across different geographies and commodities. I’d divide any spare cash between them.

By contrast, I see potential for further declines in the Polymetal share price. It’s simply too risky for me to buy at present, so I’m looking elsewhere for a solid gold miner.

The post Will FTSE 100 miners outshine the Polymetal share price in 2022? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Charlie Carman 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.

Inflation has been soaring in recent months, hitting around 7% in the US in December. The UK is also seeing high rates. This has become a key factor for me in deciding which stocks to buy. It is also the reason why multiple growth stocks have crashed recently. But there are still several companies that should be able to cope well with inflationary pressures and may even benefit. Here are my top two. 

Rising price of commodities

Mining stocks are known to do fairly well in times of high inflation, due to the rising price of commodities. Anglo American (LSE: AAL) is my personal favourite, due to its diversified source of revenues. This includes operations in iron ore, diamonds, rhodium, and copper. The soaring price of many of these commodities also meant that in the first half of 2021, revenues were able to rise 114% year-on-year to $2.8bn. Underlying EBITDA also reached $12.1bn, over a 250% rise.

Such excellent results have led to very generous shareholder returns, including a special dividend and a large share buyback programme. For the next year, it has a prospective yield of around 6%, far higher than other FTSE 100 stocks.

Unfortunately, the price of some of these commodities has fallen back from its highs last year, despite the effects of rising inflation. This includes iron ore, which fell due to reduced Chinese demand. There is a risk it could drop further. Even so, inflation seems to be here to stay, and for Anglo’s overall operations, this should have a positive effect. Therefore, I may add this stock to my portfolio for some protection against inflation.

A luxurious FTSE 100 stock

While inflation does not benefit Burberry (LSE: BRBY) in the same way as it does Anglo, I still believe that it will be able to cope well. Indeed, as a luxury fashion house, its customers are affluent and less focused on budget-cutting. This means that rising costs should not affect them in the same way as the general population. This differentiates Burberry from other FTSE 100 stocks.

There are also promising signs for the company. Indeed, in the first half of FY22, both revenues and adjusted profits were slightly higher than pre-Covid levels. This has allowed the fashion house to raise the interim dividend slightly and launch a £150m share buyback programme. The recent results also give the shares a price-to-earnings ratio of around 24, lower than rivals such as Kering, which owns brands like Gucci and Saint Laurent, and LVMH, the owner of both Louis Vuitton and Dior. This suggests Burberry may be an extremely solid choice in luxury fashion.

I feel optimistic about the appointment of Jonathan Akeroyd as CEO, who will begin in April. With experience at Versace and Alexander McQueen, Akeroyd seems well equipped for the role. Hopefully, new management will enable Burberry to increase profits further.

I am very tempted to add some Burberry shares to my portfolio. This is despite the risks that Chinese demand may slow due to potential taxes on the rich as a method of redistributing wealth. Such a move would adversely affect Burberry, as China generates a large amount of demand for luxury fashion. Even so, I feel the positives outweigh these risks, and Burberry remains a top pick, especially as it’s more resistant to inflation than some other FTSE 100 stocks. 

The post 2 no-brainer FTSE 100 stocks to buy to beat inflation appeared first on The Twelfth Magpie.

More reading

• This FTSE 100 share pays no dividends. Could that change?

Stuart Blair owns shares in Kering. The Motley Fool UK has recommended Burberry. 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.

Excellent results

Both Anglo American and Rio Tinto issued excellent half-year trading updates. In fact, AAL reported profits of over $5bn, a 1,000% increase on the same period last year. RIO also excelled, with earnings exceeding $12bn, a 271% increase on last year.

In line with these results, both companies were also able to drastically increase shareholder returns. RIO announced cash returns of $9.1bn, through both an ordinary dividend of 376 cents per share (a 143% increase on last year) and a special dividend of 185 cents per share. Even excluding the special dividends, this still gives RIO a current dividend yield of over 10%.

AAL announced an interim dividend per share of $1.71, compared to just 28 cents last year, alongside a special dividend of 80 cents per share and a $1bn share buyback programme. Excluding specials, this gives AAL a yield of nearly 8%.

For income investors, these mining stocks therefore look extremely appealing. The excellent results also demonstrate how well they have performed over the past year.

So, why have they fallen?

After such incredible results, it seems bizarre that these mining stocks have fallen so significant. But these results were primarily due to the rising prices of commodities, which are now in freefall. For example, iron ore, where AAL and RIO both generate most of their profits, has collapsed to below $100, from over $200 a few months ago. This is due to the slowing down of the construction industry in China, alongside its slowing economy. Other commodities like copper have also seen weakness recently.

The effects of this are devastating for mining stocks. This is because it’s now expected that they will report significantly lower profits for the rest of the year. As a result, similar shareholder returns to what were announced in the first half of the year seem extremely unlikely.

What am I doing with these mining stocks?

Due to the strength shown in the first half of the year, it is very tempting to buy both AAL and RIO. Indeed, using these results, RIO trades on a current price-to-earnings ratio of just 4, and AAL trades on an even lower P/E ratio of 3.8. This indicates extremely cheap valuations. But unfortunately, I feel that these results were a one-off, and there may be further to fall. As such, I’m leaving both these mining stocks on the sidelines for now.

The post Mining stocks are crashing. Should I buy Anglo American and Rio Tinto today? appeared first on The Twelfth Magpie.

More reading

• The only FTSE 100 stock I own right now

Stuart Blair 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.