Here is one of my best stocks to buy now, which currently resides on the FTSE AIM index. I believe it has great potential for 2021 and beyond.
FTSE AIM best stocks to buy now
I believe investing in the FTSE AIM can be a good earner. As with any investments, I carry out my research and look at the upside potential of a stock, as well as risk and reward.
Anglo Asian Mining (LSE:AAZ) is a gold, copper, and silver explorer and producer in Azerbaijan. It is most definitely a minnow in its respective sector, with a market cap of approximately £170m. Since the pandemic began, gold has enjoyed strong performance. The pandemic and crash caused lots of uncertainty. This led to many invesors buying gold as a safe-haven asset to store value.
In 2016, I could buy shares in AAZ for a lowly 4p per share. As I write this, shares are trading closer to 155p which is close to a 3,800% increase! AAZ’s market crash low was 77p which means it has increased over 100% since then based on current levels.
Gold rush
Here’s why AAZ is one of my best stocks to buy now for 2021 and beyond. Firstly, it has regained control of a politically disputed mineral-rich area. AAZ announced that the recent war between Azerbaijan and Armenia saw AAZ’s Vejnaly contract area “liberated”. AAZ will resume operations and I believe it could be fruitful in the long term.
Next, AAZ has been growing nicely. In the last three years it has seen a year-on-year growth in revenue, profit, and cash reserves. Full-year results for 2020, announced last month, made for excellent reading in my opinion. AAZ reported record revenues, of over $100m for 2020. In addition, cash generation of over $38m saw AAZ become debt-free.
Finally, despite the crash, AAZ has continued to pay dividends. Many firms cut dividends throughout 2020. AAZ announced a special dividend payment at the end of January 2021 based on a record 2020. It already paid a dividend in November 2020 so business is good. I think AAZ has lots of upside for 2021 with record performance, no debt and paying out dividends. I regard it highly on my best stocks to buy now list for 2021.
Risk and reward
One of the world’s best investors, Warren Buffett, has stayed away from speculative assets such as gold. These are assets that don’t provide their own cash flow. I do believe there are risks involved with investing in AAZ and firms that operate in the materials and minerals sector. AAZ is a small fish in a rather large pond. In addition to its size, it operates in a very volatile part of the world. Politics could again affect its operations, which could hinder its progress.
Gold’s longer-term prospects are risky. Low interest rates are currently aiding performance of the metal. A stock market rally could see investors become less risk averse and more confident, thereby eliminating gold’s defensive ability.
Despite these risks, I see AAZ recording a better 2021 than 2020 and continuing its impressive growth journey. AAZ is one of the highest materials-related picks on my best stocks to buy now list. I do like AAZ but here is a stock I am currently avoiding for 2021.