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As a veteran worth/revenue/dividend investor, I spend numerous time in search of beaten-down and battered FTSE 100 and FTSE 250 shares. My objective is to search out ‘fallen angels’ — in any other case strong firms whose share costs have taken (hopefully) short-term knocks.
FTSE flops
Earlier at this time, I checked the Footsie’s efficiency to study that it’s down 2.5% over the previous 12 months, excluding dividends. It’s additionally up a mere 7.8% over 5 years (additionally excluding dividends).
These are hardly returns to put in writing dwelling about, however issues have been far worse for some FTSE 100 corporations. Certainly, in a fast search, I discovered 19 Footsie shares that had misplaced at the very least a fifth of their worth over the past 12 months.
To my shock, I found that my spouse and I owned six of those losers and laggards. Our worst performer of those six was additionally the 98th-worst performer in your complete index over one 12 months. Right here it’s.
Aggro from Anglo American
My spouse and I purchased shares in mining group Anglo American (LSE: AAL) in mid-August 2023, paying an all-in worth of two,202p a share. This was nicely beneath their closing worth of three,568p on 13 January 2023.
We purchased into Anglo for 2 causes. First, for future capital development from a rising share worth. Second, for its beneficiant dividend yield, which simply beat the FTSE 100’s money yield of beneath 4% a 12 months.
Sadly, mining shares — like underlying commodity costs — will be very unstable. This has actually proved to be the case for Anglo’s inventory, which has ranged from a excessive of three,447p to a low of 1,630p over the past 12 months.
As I write on Friday afternoon, Anglo’s share worth stands at 1,832.8p, valuing the group at £24.3bn. This implies we’re sitting on a paper lack of greater than a sixth (-16.8%) from our holding. It additionally leaves this inventory down a whopping 45.9% over one 12 months, however solely 4.8% decrease over 5 years.
May this be a steal?
After a 12 months of steep worth falls, Anglo shares regarded unloved and undesirable. However may additionally they be undervalued? I’m not satisfied, as a result of they commerce on 13.6 instances earnings, which is broadly in keeping with the broader mining sector.
Then once more, this slumped inventory affords a market-beating dividend yield of 5.5% a 12 months. Nevertheless, that is lined only one.33 instances by earnings. Therefore, if Anglo’s revenues and earnings fall additional in 2024, then this payout might be below menace.
Additionally, Anglo’s dividend funds have been falling, pushed decrease by sliding commodity costs. For the 2021 monetary 12 months, every share earned a dividend of $1.18, plus a particular dividend of $0.50 cents. Final 12 months, the full payout was $0.74, with no particular dividend.
In brief, although I see potential for this FTSE 100 inventory to rebound, I’m not satisfied that it’s low cost sufficient for me to purchase extra shares. Subsequently, I’ll maintain on to my current stake, whereas awaiting the 8 February manufacturing report and 22 February earnings launch with my fingers crossed!
