One stock I’d be happy to buy right now is FTSE 100 giant Randgold Resources (LSE: RRS). I’m also going to look at the investment potential of a lesser-known precious metals miner, Sylvania Platinum (LSE: SLP), which released its annual results today.

Golden opportunity

As with gold itself, disclosable short positions in Randgold Resources are at an all-time high. The share price has fallen 30% so far this year. The hefty drop has not only put the company on cheap assets and earnings ratings by historical standards, but also turned it into a highly attractive dividend stock at a current share price of around 5,200p.

Randgold’s price-to-book (P/B) ratio of 1.6 is historically cheap, as is its forecast current-year price-to-earnings (P/E) ratio of 22, falling to 18.3 next year on expectations of 20% earnings growth. The P/E and forecast growth also combine to give a cheap price-to-earnings growth (PEG) ratio of 0.9.

Having previously paid a modest dividend, Randgold doubled the payout last year. Further chunky increases are in the pipeline, with City forecasts indicating a yield of 4% this year, rising to 5.1% next year. All in all, I agree with my Foolish colleague Paul Summers that Randgold could be a great addition to a portfolio at the present time.

Progressive small-cap

Sylvania Platinum is a producer of platinum group metals (PGMs) which include, as the name suggests, platinum, plus palladium and rhodium. It operates in South Africa’s renowned PGM-rich Bushveld Igneous Complex. Current revenue comes from the low-cost and low-risk extraction of PGMs from tailings of chromite mines in the region and it’s also looking to develop PGM shallow mining operations.

In contrast to Randgold, Sylvania’s shares have been soaring this year. They’re up 7.7% today, as I’m writing, on the back of this morning’s annual results, taking their gain since the start of the year to 64%. At a current price of 21.75p the market capitalisation is £62m.

Under the radar

Sylvania reported a fifth consecutive year of record production for its financial year ended 30 June. Weakness in the price of platinum was offset by higher rhodium and palladium prices and the company posted a 24% rise in revenue to $62.8m. Costs were higher (partly due to an acquisition in November) but bottom-line growth was still strong, with earnings up 25% to $0.0383 a share. This equates to 2.97p at current exchange rates and puts the stock on a highly attractive P/E of 7.3, suggesting it may still be under the radar of many investors.

Sylvania is well-managed and cash generative. It reported $14m cash on the balance sheet at the year-end, with no debt, and the board declared a maiden dividend of 0.35p, giving a yield of 1.6%. The platinum price has fallen to levels not seen since after the 2008 financial crisis, because supply currently exceeds fundamental demand. There’s little prospect of this improving any time soon but Sylvania’s continuing operational progress in the face of it all persuades me to rate the stock a ‘buy’.

The post Why I’d buy this FTSE 100 dividend stock today appeared first on The Twelfth Magpie.

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G A Chester 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.

Recently, the picture has been one of contrasting performance, with FTSE SmallCap S&U up around 20% since the start of the year and FTSE 100 giant Randgold down by a similar order. Here’s why I’d sell the soaring small-cap stock but buy the out-of-favour blue-chip.

Advantage S&U

S&U sold its home credit arm in 2015, leaving Advantage Motor Finance as its core business. In its annual results, released in March, the company reported an 18th successive year of record profit at Advantage. Pre-tax profit increased 20% to £30.2m on 30% higher revenue of £78.9m.

Management said today, in a Q1 update ahead of the company’s AGM, that trading “remains strong.” This bodes well for City analysts’ forecasts of a further 20% rise in pre-tax profit this year (to £36.3m) and a 17% increase in earnings per share (EPS) to 238p.

At a current share price of 2,700p, S&U’s market capitalisation is £324m and the forward price-to-earnings (P/E) ratio is 11.3. The P/E appears cheap for the EPS growth forecast. Furthermore, a well-covered 119p forecast dividend adds a generous prospective yield of 4.4%.

Bubble waiting to burst?

Interest rates have been at historically unheard of lows for the best part of a decade. This has fueled a rise in UK household debt to unprecedented levels, a notable part of which has been a vast increase in the number of cars bought on credit. The big concern I have about S&U is that car finance looks to me like a credit bubble waiting to burst.

Current interest rates, employment figures and a recent upturn in wage increases above inflation may reduce the immediate risk, but erring on the side of caution, I’m inclined to see S&U as a stock to sell at this stage.

Golden opportunity

The poor performance of Randgold’s shares so far this year wasn’t helped by a trading update last week. Q1 gold production was down 11% year-on-year and profit for the quarter was 24% lower than in the same period in 2017. However, management maintained its full-year production guidance and I believe the depressed share price represents a good opportunity to buy a slice of one of the world’s highest-quality gold-miners.

At a current share price of 5,740p, Randgold has a market capitalisation of £5.4bn and trades on a forward P/E of 22.7, based on a consensus EPS forecast of $3.42 (253p at current exchange rates). Following a doubling of the dividend last year to $2 from $1, analysts are forecasting another hike to $3 (222p) this year, giving a prospective yield of 3.9%.

The P/E and yield look highly attractive to me for a world-class miner. The company’s balance sheet is also as strong as they come: $739.5m cash and no debt.

The post Why I’d sell this small-cap star but buy this FTSE 100 stock appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended S & U. 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.

Antofantastica

The company said that the average realised copper price in 2017 was 29% higher than in 2016. This helped it to post a 31% increase in revenue to $4,749m on marginally lower production of 704,300 tonnes and with non-core metals and its railway operation making a net positive contribution to the top line.

Due to miners’ operational gearing (relatively high fixed costs), increases in revenue are magnified at the profit level. As such, Antofagasta’s operating profit soared 99% to $1,841m. Together with increased profits from associates and joint ventures, this fed down to a 119% increase in underlying earnings per share (EPS) to $0.76 versus a City consensus of $0.75. And the board hiked the dividend 177% to $0.51, compared with City expectations of $0.35.

At current exchange rates, EPS translates to 54.8p and the dividend to 36.7p. The shares are trading 2.5% higher at 910p, as I’m writing, so the price-to-earnings (P/E) ratio is 16.6 and the dividend yield is just over 4%.

With the copper price buoyant, the company guiding on production of 705,000 to 740,000 tonnes for 2018 and having plans that could lift this to 800,000 tonnes in 2019-21, I see Antofagasta’s valuation as attractive and I rate the stock a ‘buy’.

Golden future

Also on my blue-chip ‘buy’ list is Footsie gold miner Randgold Resources (LSE: RRS). The company released its annual results last month, posting a seventh consecutive year of record production and a 7% increase in revenue to $1,280m.

EPS advanced 12% to $2.96 (213p at current exchange rates) and the board doubled the dividend to $2 (144p). With the shares trading at 6,075p, as I’m writing, the P/E is 28.5 and the dividend yield is 2.4%.

Clearly this is a richer rating than Antofagasta’s. However, precious metals miners tend to trade on higher P/Es, Randgold’s balance sheet is even stronger than the copper miner’s, and there’s also been time for City analysts to revise their forecasts since Randgold’s results. The new consensus is for a 22% rise in EPS for 2018 to $3.62 (261p), bringing the forward P/E down to 23.3 and another hefty hike in the dividend to $2.82 (203p), pushing the forward yield up to 3.3%.

I view this valuation as attractive for the London market’s heavyweight goldminer, which ended last year with net cash of $720m on its balance sheet. The forecast growth for 2018 should be more than a flash in the pan, with the company reminding us today that its “10-year business plan is designed to increase net cash flows to support dividend and value growth and maintain Randgold’s position as a global industry leader in sustainable profitability.”

The post Antofagasta plc isn’t the only FTSE 100 growth stock I’d buy today appeared first on The Twelfth Magpie.

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G A Chester 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.

Soaring gold price

The price of gold rose by 5% today to $1,330 an ounce, its highest level for more than two years, as investors sought refuge in the shiny stuff following the surprise Brexit vote. The precious metal is widely considered to be a safe haven asset, and gold price movements have historically correlated well with risk aversion and market uncertainty.

I’m unsure about where the price will move from here, but I’m confident that the uncertainty is not going away any time soon. Britain’s negotiations to leave the EU and form a new relationship will likely take many years, which should make for a positive outlook for gold prices. It should also mean that gold mining stocks, such as Randgold Resources (LSE: RRS), will be a great defensive play against further volatility in the markets.

In addition to the soaring gold price, the 8% drop in the value of the pound against the dollar following the referendum result creates a double whammy benefit for London-listed gold mining stocks, as the falling exchange rate further compounds the surge in the commodity price. This means, in sterling terms, gold has risen in value by 13% today.

Randgold Resources is a good pick because it benefits from low production costs, which gives it a wide margin of safety. With an average total production cost of around $700 an ounce, its operating margins are as high as 47% with gold prices at their current levels. Its shares rose by an impressive 12% today, and I think further gains are possible, given the uncertain future.

Search for safety

Defensive stocks have fared much better than cyclical ones, as investors rush to safety.

National Grid (LSE: NG) is one of the most defensive stocks on the market, because as a regulated monopoly in the electricity and gas distribution sector, it is largely unaffected by changes in energy demand and volaility in commodity prices.

With a beta of just 0.32, the firm is rather less-cyclical and generates steady free cash flow year after year. This means the stock pays very reliable dividends, which makes it a great investment for income-hungry investors.

What’s more, the firm’s regulated inflation linked revenues means it offers solid protection against inflation – it’s dividends are inflation rated too – with the company promising to increase dividend payments by at least RPI inflation each year “for the foreseeable future”. National Grid currently yields 4.5%, with its shares up 1% today.

Weaker pound

British American Tobacco (LSE: BATS) reports its earnings in sterling, but earns an overwhelming majority of its revenues outside the UK. The 8% decline in the value of the pound will no doubt prove an immediate boost to the sterling translation of its foreign earnings.

A long-time favourite for dividend growth investors, the tobacco giant has a strong track record of delivering robust dividend growth, and has been a reliable growth story in difficult economic circumstances. I’m confident that its outlook will not have changed dramatically following the EU vote, and it seems the market agrees. At the time of writing, shares in British American Tobacco rose 4% to 4,450p.

The post Why are Randgold Resources Limited (+13%), British American Tobacco plc (+4%) & National Grid plc (+1%) bucking the Brexit downtrend? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Britain’s foremost index stepped above the 6,400-point landmark for the first time since early December on Tuesday, taking total gains in the past three months to 13%.

Despite the FTSE 100’s resilience, however, I remain convinced that a severe retracement remains very much in the offing.

Built on creaking commodities

One of my major concerns over the fate the FTSE 100 is that index is being kept afloat mostly by a resurgence in commodities-related stocks. Indeed, nine of the Footsie’s top ten risers during the past three months are involved metals or fossil fuels excavation.

Diversified producer Anglo American — a company heavily upon the worsening iron ore market — has led the chargers, the stock gaining an unfathomable 257% since hitting multi-year troughs in January!

Fellow diversified diggers Glencore, BHP Billiton and Rio Tinto have also torn higher during the past few months. And dedicated oil play Shell has also performed exceptionally, its share price rising 42% during the period, while gold excavator Randgold Resources‘ share value has advanced almost 50%.

Overvalued

I reckon Randgold Resources’ rise may hold up better than its peers in the near-term, however, the prospect of further macroeconomic bumpiness possibly prompting further ‘safe haven’ buying into precious metals.

But the worsening supply/imbalances washing across most major commodities markets is leaving much of the resources sector on shaky ground, in my opinion. Each of the commodities plays described above is now sailing well above a P/E rating of 10 times, territory reserved for stocks with high risk profiles. This leaves plenty of room for a stark correction.

And a huge reversal is a very real possibility should Chinese economic data continue to disappoint, and the US dollar regains strength thanks to fresh Federal Reserve monetary tightening and weakening emerging market currencies.

Developing regions on the rack?

Indeed, wider concerns over the health of developing markets provides another lever for a harsh retracement. Data this month showed China’s economy expand just 1.1% between January-March and the previous quarter, casting fresh doubts over Beijing’s 2016 growth target of between 6.5% and 7%.

Stocks with a huge emerging market bias like Standard Chartered, Unilever and British American Tobacco have also punched huge gains in the past three months, these stocks rising 18%, 17% and 19%, respectively, since mid-January.

So while I believe many such companies remain strong long-term buys, signs of fresh economic choppiness in far-flung regions could send these shares — and with them the broader FTSE 100 — sinking again.

Think of England

And of course there are plenty of worries closer to home that could send the FTSE 100 shuttling lower.

The run-up to June’s EU referendum is likely to prompt plenty of volatility across share markets, particularly if polling data suggests that voters are leaning towards a possible ‘Brexit.’ And an eventual ‘leave’ vote could send investors packing as Footsie companies large and small tackle a range of issues, from escalating labour costs to the financial impact of future trade deals.

Meanwhile, concerns that the British economy is losing steam are also gaining momentum. Data on Wednesday showed UK unemployment increase for the first time since mid-2015, a 21,000 rise taking total jobless to 1.7m. And earnings growth slowed to 1.8% from 2.1% in the prior three months.

The post Why The FTSE 100 Is In Danger Of A Horrible Correction! appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of Unilever and has recommended Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Take a bite

Shares in catering and support services provider Compass Group (LSE: CPG) have been extremely volatile since the start of 2016, although prices have stomped higher more recently and gained more than a tenth over the past fortnight.

The Chertsey business received further fuel in Thursday’s session after announcing that total organic revenues surged 5.9% between October and December. Compass Group saw sales rise across all regions, including a solid 7.9% advance in North America, thanks to strong customer retention and new contract wins.

And the company remained upbeat over its outlook for 2016 and beyond, claiming that “growth in North America is strong, Europe is improving, and we are managing the challenges in the Rest of World region.”

The City expects Compass Group to rack up a 4% earnings rise in the year to September 2016, resulting in a slightly-elevated P/E rating of 20.7 times. But I believe the firm’s terrific momentum in all of its major territories merits such a premium.

Soaring higher

Budget flyer Ryanair (LSE: RYA) also greeted the market with a bubbly update in Thursday trade, although moderating risk sentiment across financial markets pushed the stock 3.8% lower from the midweek close.

Ryanair advised that passenger numbers charged 25% higher during January, to 7.5 million, while the load factor improved by 500 basis points to 88%. The Dublin airline advised that a combination of low prices and the success of its ‘Always Getting Better‘ customer service programme helped to drive numbers.

And as demand for cheap flights from leisure and business customers continues to take off, and Ryanair expands its base network to harness such growth  (the company opened new hubs in Berlin, Corfu, Gothenburg and Milan between October and December alone ), I fully expect earnings to continue moving higher.

On the retreat

Precious metals producer Randgold Resources (LSE: RRS) has also enjoyed a fresh bump higher on Thursday thanks to a chunky rise in the gold price.

Indeed, the miner has risen 23% since the turn of the year as the commodity’s value has gained ground. And the ‘safe-haven’ metal burst back through the $1,150 per ounce marker just today, taking it to levels not seen since the end of October as the US dollar continued to lose value.

With Randgold Resources also steadily hiking output and doubling-down on its cost-saving measures, the City expects the company to bounce from an anticipated 25% earnings fall in 2015 with a 21% rise in the current period, resulting in a high P/E rating of 27.2 times.

But I am unconvinced that the stock can maintain this strong momentum. Given that fresh greenback strength is likely in the coming months, and physical gold demand remains extremely patchy, I reckon gold prices could find themselves on the retreat again in the near future. Consequently I believe Randgold Resources is an unappealing pick at current prices.

The post Should You Buy Randgold Resources Limited, Compass Group plc & Ryanair Holdings Plc On Thursday? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Medicines giant on the march

Pharmaceuticals ace AstraZeneca (LSE: AZN) saw its share price enjoy a solid 3% bump between last Monday and Friday and I believe further gains could be on the horizon. Not only does the essential role of medicines make the firm a strong ‘defensive’ contender (a critical quality in the current investing climate) but I believe the prospect of further positive regulatory news should keep the stock price rising.

Investors should be aware that AstraZeneca isn’t likely to generate breakneck earnings growth any time soon however, as crippling patent losses like those of Crestor and Nexium keep sales on the back foot. Indeed, the City expects the drugs play to follow a predicted 6% earnings slip in 2015 with a similar drop this year.

Still, I reckon a P/E rating of 16.8 times is a decent point at which to buy, as AstraZeneca’s rejuvenated R&D operations — combined with stunning healthcare investment across the world — is likely to drive profits through the roof in the years ahead.

Throw in a projected dividend of 280 cents, a figure that yields a terrific 4.2%, and I believe AstraZeneca is a very canny investment.

Gold play goes forth

I’m far from positive concerning the growth outlook at Randgold Resources (LSE: RRS) however, thanks to the uncertain outlook over metal prices currently.

Randgold Resources saw its stock value gain 4% between Monday and Friday, helped by a slight sagging of the US dollar and a relief rally across global stock and commodity markets. But as investor sentiment continues to sway back and forth, I don’t believe stockpickers should put much faith in this mini rally holding up for the mining and energy spaces.

Sure, Randgold Resources may be steadily hiking output to offset falling gold prices. But safe-haven demand for gold is barely holding the price above $1,000 per ounce. And the prospect of fresh dollar strength, allied with falling bar and jewellery demand from Asia, could send values below this critical marker.

The City expects Randgold Resources to punch a 21% earnings rise in 2016, creating an elevated P/E multiple of 27.2 times. Given the company’s high risk profile, I don’t believe the company merits serious consideration at current stock prices, however.

Producer receives fresh fuel

Oil giant Tullow Oil (LSE: TLW) also surged last week as Brent values steadily recovered ground. After toppling to fresh 13-year troughs on Wednesday at $27.20 per barrel, ‘black gold’ prices bounced back to finish the week around the $32 mark.

This ascent consequently drove Tullow Oil’s share value 14% higher between Monday and Friday. But I believe the crude market remains too fragile to realistically expect further price gains — just last week Iraq announced that production is rattling along at record levels, adding to fresh waves of supply hitting the market from fellow OPEC member Iran.

When you also factor-in insipid global demand growth, not to mention the potential for further US dollar strength, I believe Tullow Oil could see its share price dive again.

Broker consensus suggests the producer will improve earnings from 1.5 US cents per share in 2015 to 14.2 cents in 2016 as output from its TEN asset kicks-in. But with Tullow Oil sporting a subsequent P/E multiple of 24.8 times, like Randgold Resources I believe the risks outweigh the potential rewards at current prices.

The post Can Last Week’s Winners AstraZeneca plc, Randgold Resources Limited & Tullow Oil PLC Keep Climbing? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca and Tullow Oil. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.