On Friday, the FTSE 100 fell more than 1.5% in a day, ending the week. Sour note..for Anglo American (LSE: AAL), Friday simply went around a bad week and made it worse. Anglo American stocks performed worst on the FTSE 100 Index last week. It fell by more than 12%, ending the week just over 2,700p. what happened?
Decrease in palladium, increase in inflation
If a stock price drops to double digits in a week, there are usually some things that can contribute to it. This was the case for Anglo American stock prices.
The first reason for the fall was related to the price of palladium. It is a precious metal that has several important uses. Palladium’s primary use is in catalytic converters for automobiles and other vehicles. Anglo American is the world’s largest producer of this metal, accounting for 40% of its total supply.
Logically, if a company is very focused on one product (in this case, one metal), that business can be overly impacted by it. So when the price of palladium fell 10% last week to $ 1,048 per ounce, it was always painful. This decline was also seen in other precious metals, including gold.
The fall is also related to another reason why Anglo American stocks fell last week. Concerns about rising inflation are rising in both the United States and the United Kingdom. The knock-on reaction to this is for the central bank to raise interest rates. Gold and other precious metals do not pay interest, which makes them less brilliant for investors and usually lowers their prices.
Another impact of higher interest rates will make it more expensive for British Americans to refinance and issue new debt. Interest repayment will be higher than it is now.In Results for 2020, It showed a net debt of $ 5.6 billion. This isn’t out of control, but it’s still quite a few.
Anglo American stock plunge worth buying
Another issue reported last week was lack of control and excessive risk at Australian mines. Five workers were injured in a mine explosion last May. An inquest currently announced showed that the company was unable to control dangerous gases in the area in the months prior to the problem.
Anglo American says it is investing more in its safety initiatives as a result. The event is a bad PR for the business and therefore contributed to the fall in stock prices last week.
Despite the above issues, I don’t think the 12% fall last week would trigger a significant fall in Anglo American stock prices. I think the precious metal market should stabilize if the inflation shock is completely resolved. I also think that the Australian mining problem will be solved and solved.
The business is basically healthy and profitable. Despite last week’s decline, stocks are still up more than 51% in a year. So, in balance, I’m thinking about buying stocks with this dip now.
jonathansmith1 does not have a position in any of the companies mentioned. The Motley Fool UK does not have a position in any of the listed shares. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by exploring different insights, Better investors than us.
Three reasons Anglo American stocks fell 12% last week
https://www.fool.co.uk/investing/2021/06/21/3-reasons-why-the-anglo-american-share-price-dropped-12-last-week/ Three reasons Anglo American stocks fell 12% last week