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On more than one occasion, "my pal Warren" has commented that folks have no fear about buying stocks at the top of the market but give them a chance to buy that same stock on sale at half the price and they have no interest.

Last March I was lamenting a lost opportunity to buy Anglo American ADR (NASDAQ: AAUK) at $26 or $27 before it popped to $34 a share. I wanted it at a price it never dropped to, and I did not get it (Chasing Value: Anglo American -- great pick, but alas...).

Then the market started dropping, and dropping some more until finally things were looking pretty bad and I decided it was time to make my play. I recently bought in at $11.69. and it has bounced up and down since then, closing on Thursday November 6, at $10.37, dropping from $12.13 a day earlier.

Since last spring the bottom has fallen out of the commodities market. If you have pondered the idea of buying into a diversified fund focused on mining and mineral assets, then the following profile may depict a stock for you.
  • The UK-based company owns significant stakes in global producers of platinum (75%, Anglo Platinum) and diamonds (45%, De Beers S.A.). In addition, Anglo American has interests in ferrous and base metals, and industrial minerals; it also is one of the world's largest independent coal miners. Though it used to have a majority stake in AngloGold Ashanti, Anglo American has reduced its share to 17%. The company controls assets around the world.
Just a few metrics that may be of interest: AAUK is paying over a 5% yield, has a forward P/E ratio 3.2, and almost 30% profit margins. As the following 10-year chart indicates, the stock is almost down to where it was way back then.

Chart

Given that the world is printing money unabashedly, and that China and India are not going to stop growing, I think the current prices for coal, gas, diamonds, gold, silver, platinum and all else are destined to go up dramatically after we all take a deep breath. I have no idea what will happen in the short term, but in the long term I believe inflationary pressures will be significant.

Owning a company like Anglo American that is diversified around the world with significant exposure to both precious and semi-precious materials, as well as basic commodities, seems like a good place to invest, if you have the courage to buy it on sale as I believe it is now.

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 of AAUK.

Chasing Value: Anglo American on sale originally appeared on BloggingStocks on Fri, 07 Nov 2008 12:35:00 EST. Please see our terms for use of feeds.

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