This FTSE 100 stock looks a total steal to me

As a long-term investor, I always look for undervalued stocks. I don’t want to buy businesses that bomb and prefer to invest in ‘fallen angels’. This is a solid company whose stock has fallen dramatically. So, I’m a cheap hunter, with a favorite hunting spot FTSE 100.

My investment strategy is simple

Armed with 37 years of experience, I have been perfecting investment strategies for decades. Today, I keep it simple. I bought a solid, well-established company whose stock was trading at a low amount of earnings.

Also, I prefer stocks that pay dividends – the regular amount of cash paid out by a company to its shareholders. Although most UK-listed companies do not pay dividends, almost all FTSE 100 members do.

Therefore, I often do stock screenings from the FTSE 100 (and FTSE 250) to find stocks that fit my value criteria. During one recent search, I discovered an undervalued gem.

Anglo American not ESG stocks

When I find a stock that ticks all the boxes, I rarely hesitate to buy it. But one value shows I missed it Anglo American (LSE: AAL).

London-headquartered Anglo American is a leading global miner and the world’s largest producer of platinum. The group also mines and sells copper, diamonds, iron ore, nickel, and coal to make steel.

As mega-miners, Anglo American activities are destroying our environment. Therefore, many ESG (Environmental, Social and Governance) investors will not buy these stocks. However, without mine products, the global economy would collapse almost overnight.

Anglo showed the slide

As I write, Anglo shares are trading at 2,672.5p, making this £35.9bn company a Footsie heavyweight. But their shares have taken a dive in 2022-23, as seen below:

current price	2672.5 p
One day	-0.2%
Five days	+3.4%
One month	-8.8%
Year to date	-17.4%
six months	-8.4%
A year	-34.2%
five years	+65.9%

Over the past year, this stock has lost more than a third of its value. However, it has increased by almost two-thirds in the last half-decade. These figures do not include cash dividends, which would boost this return by several percentage points each year.

This share appears to be undervalued

At a 52-week high, Anglo American’s share price peaked at 4,292.5p on 19 April 2022. It then fell to 2,437.5p on 16 March, before rebounding 235p (+9.6%) to its current level.

Unfortunately, I’m frustrated that I didn’t see this obvious buying opportunity last month. If I saw Anglo shares trading below £25, I would have rushed to buy some.

Even so, despite the recent recovery, the stock looks cheap to me. They trade at a modest price-to-earnings ratio of nine, for a yield of 11.2%. This is a reasonable discount to the wider FTSE 100.

What’s more, Anglo’s market-beating dividend yield of 6.1% a year is more than 1.5 times the Footsie’s annual cash yield of 4%. Also, it is guaranteed 1.8 times by earnings, which is a fair margin of safety.

That said, Anglo has cut dividends on occasion, most recently in 2015, 2016 and 2020. And experience has taught me that mining companies’ earnings can be volatile – as well as stock prices. Indeed, I have made and lost fortunes investing in mining stocks.

In summary, if I had cash to spare today, I’d happily buy these FTSE 100 shares at current price levels!