Anglo American PLC

AngloAmerican diamond mining

Anglo American plc (AAL.L) operates as a mining company worldwide. The company explores for rough and polished diamonds, copper, platinum group metals, metallurgical and thermal coal, and iron; and nickel, polyhalite, and manganese ores, as well as alloys. Anglo American plc was founded in 1917 and is headquartered in London, the United Kingdom.

The chart of AAL.L is shown below over the past two years in my normal format using a weekly candlestick format.

VectorVest chart of Anglo American
Click or tap image to enlarge

VectorVest values AAL.L at £46 while the share closes at £35 on the 17th of February 2022. The share by the VectorVest calculation is much undervalued by the market. The VectorVest valuation is shown by the green line study above the price plot.

In the bottom window below the price, the blue study shows that forecast Earnings per share (EPS) is rising and this is the engine that’s been driving the share price upwards. Over the two years, forecast EPS has risen from approximately £1.5 to £3.5.

On VectorVest, the Relative Safety (known as RS) of the earnings stream is ranked as fair. This share would NOT fit into the VectorVest Worry Free trading system with a RS of less than 1 on a scale graduated between o and 2. A low RS is common on stocks that are exposed to the ravages of the commodity cycle.

AAL.L pays a dividend yield of nearly 5% and this is well covered by an earnings yield of double that amount with an excellent projected growth rate of the dividend. The dividend growth (DG) calculated by VectorVest is 21%.

The metric measuring long-term share price appreciation potential in relation to a AAA rated corporate bond (known as RV) is rated as excellent by VectorVest. AAL.L has a forecast Earnings Growth Rate (GRT) of 33% which VectorVest considers to be excellent.

The overall rating of AAL.L using the VectorVest Master Indicator VST (Value, Safety and Trend) is rated as very good.

AAL.L trended strongly upwards from the March 2020 Covid lows until June 2021. Since this time, the share has been consolidating with a pattern known by technically orientated traders as a “cup and handle”. This is a bullish formation especially in a stock with strong fundamental growth metrics.

Over the past two weeks, AAL.L seems to have broken upwards out of this pattern on good volume (not shown). Again, this is bullish behavior. The target from the cup and handle pattern derived from classical charting studies and the VectorVest fundamental target are approximately the same. The breakout of the pattern is shown by the horizontal blue line on the above chart.

AAL.L is on a VectorVest Buy recommendation. Please note that the opportunity is for investors/traders who understand risk management and position sizing techniques due to the low level of Relative Safety. As stated above, this is NOT a Worry-Free opportunity.

On the 17th of February, the advice on VectorVest is not to buy shares as the overall market is trending downwards and has been for several weeks. AAL.L has been strong in this period of market weakness. Shares that show strength in a market downturn tend to be the first to move when the overall market turns. The overall market trends are displayed on VectorVest each day. Below I show the technical position of the overall UK market after the close on the 16th of February 2022.

VectorVest Color Guard 16 Feb 2022
Click or tap image to isolate

—David Paul

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