Investors tend to overreact to geopolitical risk, and the commonly accepted hedge is gold. The Russia-Ukraine conflict brings a different kind of systemic risk with it in that we’re sitting with a situation where essential metals will be in short supply in the interim; one of those is platinum. As a result, platinum stocks could benefit.
Russia accounted for 12.3% of the world’s platinum exports in 2021, causing a significant void to fill, considering the fact that materials generally don’t have close substitutes. A fun fact about platinum is that it has outperformed gold during both the Dot-com bubble in 1995 and the housing crisis in 2008, suggesting that it performs extremely well as a hedge against market turmoil.
Platinum is currently trading in and around the $1,000 handle, and it’s difficult to find a bearish argument against it; here are a few stocks with platinum exposure that I think will thrive in the short- to medium-term.
- Sibanye-Stillwater (NYSE:SBSW)
- Anglo American Platinum (OTCMKTS:ANGPY)
- Impala Platinum Holdings (OTCMKTS:IMPUY)
Platinum Stocks to Buy: Sibanye-Stillwater (SBSW)
Sibanye is a South African diversified metals company and the largest primary platinum producer globally. The firm has grown from strength to strength under its CEO, Neal Froneman. Its acquisition of Lonmin in 2019 really set it apart from most other platinum miners as it has allowed the entity to scale at a significant rate.
During 2021, Sibanye generated $11.64 billion in revenue, a 50.4% increase from the previous year. We’ll likely see the firm sustain its growth trajectory as the metals and minerals index remains elevated amid supply-chain issues.
Furthermore, Sibanye’s stock is undervalued after producing fourth-quarter earnings of 77 cents per share. SBSW stock is trading at a 5-year discount to cash flow worth 91.80%, suggesting that the asset’s intrinsic value is not yet priced in by the market. Additionally, with a dividend yield of 9.06%, Sibanye is a lucrative dividend play; I believe it can ascertain its dividend profile as the precious metals space is aligned for a multi-year bull market.
Anglo American Platinum (ANGPY)
Better known as Amplats, Anglo American Platinum is the world’s largest all-round platinum producer, meaning that its midstream operations trump that of Sibanye’s. This platinum pure-play company operates in Sub-Saharan Africa and produced a staggering $215 billion in revenue during the second half of its previous financial year. Additionally, the firm produced $108 billion in EBITDA, $49 billion net cash and a 183% return on capital employed.
Amplats remains well-positioned to thrive during the short term, with elevated platinum prices being the key benefactor; however, it’s the longer-term that excites me the most about this stock as Amplats has the capacity to dominate the supply line for the EV (Electric Vehicle) market, adding an abundance of earnings growth potential to its business model.
Although it has surged by more than 20% this year, the stock remains investable, and I don’t think the market has fully priced in Amplats’ carefully articulated platinum portfolio. Amplats is trading at a price-to-earnings ratio of 7.56x and a PEG (price-to-earnings growth) ratio of only 0.05x, suggesting that its stock price hasn’t grown as rapidly as its earnings have, leaving us with an undervalued asset.
From a dividend vantage point, Amplats is a sound investment. Its dividend yield of 5.74% is met with a dividend coverage ratio of 2.5x, signaling a quality risk-return tradeoff for those seeking income-based investments.
Platinum Stocks to Buy: Impala Platinum Holdings (IMPUY)
Impala Platinum is one of the most efficient platinum producers out there, with an EV/EBITDA ratio of only 3.71x. Implats’ primary source of income derives from its Impala Mine in the North-West of South Africa, which has approximately 131 million attributable ounces of platinum.
Implats posted $129.6 billion in revenue during 2021, an 86% increase from the prior year. As mentioned on many occasions during this article, precious metal prices are expected to remain elevated for quite some time, meaning that Implats will most likely sustain the financial prowess that it displayed last year.
We’re looking at an undervalued stock here. Impala Platinum is trading at a price-to-earnings ratio of 5.79x, which is 67% lower than the sector, signaling robust earnings and an underappreciated asset. In addition, the stock has recently formed a momentum pattern by trading above its 50-, 100- and 200-day moving averages.
On the date of publication, Steve Booyens did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.