A major appeal of Rio Tinto (LSE: RIO) (NYSE: RIO.US) is its financial standing and stability. Certainly, it has been hit hard by the downturn in iron ore prices (which account for the majority of its revenue), but the company has been able to maintain relatively strong profitability and is even set to distribute additional capital to shareholders this year via a share buyback.
Of course, Rio Tinto remains a very appealing income stock, with its dividend yield currently being a very impressive 5.4%. And, with shares in the company trading on a price to earnings (P/E) ratio of just 12.8, they offer significant upside while the FTSE has a much higher rating of 16. So, while the near term may be tough if commodity prices remain weak, Rio Tinto appears to offer superb potential for capital gains, as well as a top yield and relative stability. As such, it seems to be worth adding to your ISA right now.
Shares in Anglo American (LSE: AAL) have been hit hard by the slump in commodity prices and have fallen by 30% in the last year alone. This means that they now offer tremendous value for money, since they trade on a price to book (P/B) ratio of just 0.68. As such, they could be due for a significant price rise over the medium term even if impairments and further commodity price falls are on the near term horizon.
In addition, Anglo American is expected to pick up its profitability over the next couple of years, with its bottom line due to rise by 39% next year, for example. Certainly, this is highly dependent upon the wider trading environment but, with such a large margin of safety on offer, higher than average volatility seems to be a price worth paying for such a significant amount of price appreciation potential.
Due to its focus on gold, Randgold Resources (LSE: RRS) (NASDAQ: GOLD.US) has not been hit as hard as many of its mining peers, with the gold price being far more robust than iron ore, for example. In fact, shares in Randgold Resources have risen by 4% in the last year, which is in-line with the return of the wider index.
However, looking ahead, Randgold Resources appears to be fully valued at its current price level. Certainly, it is expected to deliver strong performance moving forward, with its bottom line forecast to rise by 8% this year and by 14% in 2016. However, this growth appears to be fully priced in, since Randgold Resources trades on a price to earnings (P/E) ratio of 25.7, which equates to a price to earnings growth (PEG) ratio of 1.6. As such, Randgold Resources seems to be worth avoiding at the present time in favour of sector peers such as Rio Tinto and Anglo American.
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