Chasing Value: Anglo American cuts 19,000 jobs & dividend

The stock closed yesterday at $8.75 and is trading down at 12:20 EST about 16% to $7.35. Not only is it down considerably from my starting point, but the dividend was a consideration in the selection of this stock. The following ten-year chart depicts the stock now returning to levels not seen in almost a decade, before the run-up in commodity prices.



It is not my expectation that AAUK will return to the heights of an over heated market any time soon. However, I continue to believe that the future will bring inflation do to the extreme increase in the currency. When it does, this "right-sized" mining company with assets that include platinum, gold, silver, copper, nickle, coal, timber, and more will see its profits return. The job and dividend cuts will contribute to this happening faster.

That said, the time frame is in question and low oil prices, falling housing prices, no current pressure on wages, and troubling global liquidity is likely to stall off inflation and perhaps AAUK's potential this year.

I sold off the stock on an upswing in January and bought it back for below my initial cost so I am in a better position than my original story. The format I have followed for the picks, though, does not allow for trading, so for now the $10.99 starting point leaves me with a loser after seven weeks.

The price of the company is getting to the point that it may become even more tempting as a takeover target. I may do some meager taking over by buying more shares. I'm thinking about it.

Update: The closing price was $7.43, down -$1.32, or -15.09% as of 04:00 PM EST

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares and options in AAUK.