AngloGold Ashanti (AU) has gained some attention lately as one of John Paulson's top picks. He notes that gold stocks have badly trailed metal prices and AngloGold Ashanti is at its lowest valuation in 10 years. Paulson is a big name in American hedge funds and has a multitude of followers in the investing world. His picks are widely watched and accepted.
Many seem to forget that Paulson made his fortune selling subprime mortgages. He made his reputation through bad trades and suspicion of fraud. He is well known for investing almost all of his money in gold. So it comes as no surprise that he would recommend this company. However, that does not mean that this is a bad recommendation.
AngloGold Ashanti is headquartered in South Africa, which gives merit to its mining capabilities. Currently it has 20 operations in 10 countries spanning four continents. It also participates in several exploration programs in both new and established gold mining territories. With operations in Africa, Latin America, Australia, and the U.S., AngloGold Ashanti is really a global company. Its website claims that maximizing shareholder returns is a main focus for the company. There's always concern for a value investor when that is the main focus. However, Ashanti appears to be a solid company with solid financials.
Earlier this month, the gold miner reported earnings that exceeded expectations for Q1 2012. This is in response to higher gold prices, improved margins, and a $90 million net tax credit. It just barely missed its production target in the first quarter due to safety stoppages in South Africa, but remains on track to hit its yearly goal. Earnings per share increased by 46% on the U.S. exchange. These are food numbers for Ashanti. If it maintains this pace, the company will only grow in value.
AngloGold Ashanti does appear to be a great addition to the value investor's portfolio. For a company that produces over 4 million ounces of gold per year, $35 seems to be a fairly low share price. Yet that is where the trading seems to be leveled out at. Ashanti is geographically diversified. It is an expert in gold, which though can be turbulent is also highly profitable. And it maintain its numbers. I would have to agree with Paulson that this stock is genuinely undervalued. AngloGold Ashanti has great investment value.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.