The FTSE 100 has appreciated by 2.6% over the last week, partly on hopes of easing geopolitical tensions. One FTSE company that has not joined the party is BHP Billiton. The company plummeted by 5% today on the back on demerger news. However, it is not all bad news for the mining sector, as two mining companies have over the last week climbed up Stockopedia’s StockRanks.
It is also interesting to note that miners have started to move up the StockRanks just as the mining sector begins to outperform the market after a three year lag. Could it be that the cyclical lull is coming to an end and investors are starting to move back into mining stocks?
Mining stocks
Rio Tinto
The mining company, Rio Tinto, has an overall StockRank score of 92/100 rising from 86 last week. Rio’s recent half-year report noted that its cost reduction programme is ‘ahead of schedule’, production volumes are reaching ‘record’ levels, while ‘productivity improvements’ are being driven ‘across all our business’.
This narrative appears to leave a footprint in the numbers. Most notably, the company’s fundamental health (F-Score) is improving with an increased score of 8/9 which has bolstered Rio’s QualityRank up to 91/100. The F-score uses Return on Assets to measure profitability. Rio’s Return on Assets has improved from -2.5 last year to 3.1 this year. The F-score also uses Asset Turnover to measure productivity. Rio’s Asset Turnover increased from 0.44 last year to 0.47 this year.
Investors are clearly getting excited by these trends. Rio Tinto has beaten the market by 3% over the last month and 8% over the last three months. The company also trades within 7% of its 52 week high. This support Rio’s MomentumRank (78). The company is also cheaper than many companies, and has a ValueRank of 66. Indeed, it trades on a forward P/E ratio of 10 - cheaper than 75% of the market.
Anglo American
A second mining company, Anglo American, recently admitted that it faces headwinds from lower commodity prices and the effects on ongoing industrial action. The company’s StockRank has nevertheless jumped by 6 over the last week, and now stands at 91.
Investors have recently been getting excited by growth in production volumes and the near completion…
