Allan Gray sees value in metal stocks as oversupply subsides

Some platinum stocks are looking attractive again as oversupply that depressed prices for years subsides, says South African money manager Allan Gray, which oversees the equivalent of about $45bn.

Companies Allan Gray has invested in include world number two producer Impala Platinum and Royal Bafokeng Platinum, the best-performing stock in the sector in 2018 in Johannesburg, said analyst Rory Kutisker-Jacobson.

Impala said on February 21 the money manager had increased its stake to 20%.

South African miners, which account for about 70% of the world’s known primary platinum resources, have cut back on spending, gradually erasing an excess of the metal, according to Kutisker-Jacobson.

Anglo American Platinum said last week it would pay its first dividend in six years after reducing debt and more than doubling profit. “You see the structural decline in South African platinum production and, given where share prices are at the moment, we think it’s a relatively attractive proposition,” Kutisker-Jacobson said.

An index of platinum stocks in Johannesburg has lost 15% in the past year, compared with the 15% advance in the market’s main benchmark index.

Platinum is likely to be in a small surplus again in 2018, Anglo American Platinum said on February 19. /Bloomberg