Why the Anglo American share price shot up 40% in April

For a FTSE 100 inventory to leap 40% in a single month, one thing fairly important should have occurred. So it’s no shock that the Anglo American (LSE:AAL) share value spike caught lots of traders’ consideration. Right here’s what occurred with one of the best performing FTSE 100 inventory in April.

Huge information on the wire

The principle surge got here in late April when information broke that BHP Group had supplied a £31.1bn all-share takeover proposal for the agency.

There are lots of synergies between the 2 corporations, most notably within the copper mining house. Additional, the Anglo American share value probably seemed low cost to BHP Group, given the falling share value over the previous yr.

Normally with takeover bids, the share value will rapidly soar to the extent implied by the supply value. On this proposal, current shareholders would obtain a complete worth of £25.08 per Anglo American share. Not solely this, however they might additionally obtain further worth as a part of the deal. Because of this proudly owning the inventory now can be price properly above £25.08.

Naturally, the share value jumped from round £22 earlier than the announcement to only beneath £27. It’s onerous to pin an actual honest worth on the inventory based mostly on the supply. But clearly, traders imagine it to be round this mark.

Looking for the worth

Regardless of the soar, we obtained affirmation not too long ago that the supply has been rejected. BHP Group has a couple of weeks to make a renewed supply it the administration group desires to.

But, the inventory has (thus far) held on to the features from the previous couple of weeks. I imagine a part of that is all the way down to the truth that the inventory was undervalued. The supply awakened some traders to this reality. Despite the fact that the 40% soar probably makes it now barely overvalued within the quick time period, I wouldn’t be stunned to see this fall a bit of however then consolidate at the next value than earlier than.

In any case, I anticipate outcomes for this yr to enhance, because of rising commodity costs. For instance, the copper value is up 20% this yr alone. On condition that within the 2023 firm outcomes, copper and nickel manufacturing was up by 23%, I feel it’s properly positioned to revenue from this transfer.

Having to cross on this one

The most important threat I feels is that I don’t see important potential for the inventory to rally from the present value. It’s true that I anticipate the enterprise to carry out properly. However the soar put up takeover information signifies that there’s little worth available proper now. After the soar, the inventory’s up 12% over the previous yr.

Additional, if one other counter supply is available in and is accepted, there can be little level me shopping for as a long-term investor.

With that in thoughts, it signifies that though I just like the agency, I can’t see any rational cause for investing proper now.