Of course, at the start of 2016, everyone was selling miners. Commodity prices had crashed and many firms — including Anglo — had too much debt. So buying the shares required a bold contrarian call.

I managed to buy some at the lows. But although I made a good profit, I failed on the second test and sold my shares too soon. I should have held on.

If I still owned Anglo American shares today, what would I do? And should I consider buying back in after such a strong run?

More to come?

Cyclical businesses can be difficult to value because they often look cheap when profits are near a peak. Miners are particularly difficult because earnings can be extremely volatile, based on the price movements of a few commodities.

Anglo American certainly looks good value based on its 2018 financial performance. The shares trade at 11 times 2018 free cash flow and 10 times underlying earnings. Net debt has been reduced to just $2.8bn, which I think is insignificant relative to last year’s after-tax profit of $3.2bn.

City forecasts suggest that Anglo’s earnings will rise by about 15% this year. My sums suggest that if these forecasts are correct, chief executive Mark Cutifani will have a lot of spare cash to play with after the ordinary dividend has been paid. I think shareholders could see additional returns, either through cash dividends or share buybacks.

In the meantime, I think Anglo American’s 4.8% dividend yield looks fair value. Although I don’t think the shares are in bargain territory anymore, I’d still be happy to buy a few of these for income.

This small-cap has doubled since January

One stock I do already own is small-cap miner Sylvania Platinum (LSE: SLP). This company operates platinum mines and tailings plants in South Africa, which extract platinum group metals from other mines’ waste materials.

Sylvania shares were up by 4% at the time of writing on Monday following, a solid third-quarter update. As a shareholder, I was impressed by the headline figures showing that net profit rose by 33% to $5m during the three months to 31 March. Net cash rose by 17% to $23.7m and now accounts for about 20% of the group’s market cap.

My concern is that this increase in profits seems mainly to be due to a 15% rise in the so-called basket price of platinum group metals (PGM).

PGM prices have spiked higher over the last year in part because of a sharp rise in demand for palladium, which is used in catalytic converters on petrol cars. As European drivers have switched back from diesel to petrol, demand for palladium has spiked.

Sylvania’s production actually fell by 3.5% to 16,256 PGM ounces during the third quarter, due to water shortages and power outages. This has forced boss Terry McConnachie to cut production guidance slightly for the current year, from 73,000-76,000 ounces to 72,000 ounces.

Sylvania Platinum still looks affordable, on 7 times forecast earnings and with a cash-backed 3.6% dividend yield. But I’d be tempted to wait for a pullback before buying. I’d hold.

The post Forget buy-to-let. I’d buy this FTSE 100 stock that’s turned £1k into £9k appeared first on The Twelfth Magpie.

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Roland Head owns shares of Sylvania Platinum. 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.

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.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.