Is Glencore PLC A Better Buy Than Rio Tinto plc Or BHP Billiton plc?

Who wins the battle of the mining giants: Glencore PLC (LON: GLEN), Rio Tinto plc (LON: RIO) or BHP Billiton plc (LON: BLT)?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

opencast.miningIt’s been a mixed 2014 thus far for investors in mining giants Glencore (LSE: GLEN), Rio Tinto (LSE: RIO) (NYSE: RIO.US) and BHP Billiton (LSE: BLT) (NYSE: BBL.US). That’s because, while Glencore and BHP Billiton are up 10% and 6% respectively (versus a flat performance from the FTSE 100), Rio Tinto is down 3% year-to-date.

However, will this level of performance be mirrored through the remainder of 2014 and beyond? Can Glencore continue to outperform its two rivals?

Mixed Prospects

Mixed performance is also expected with regard to next year’s earnings figures, with Glencore potentially offering investors a higher growth in profit than Rio Tinto or BHP Billiton. Indeed, Glencore is forecast to increase earnings per share (EPS) by 14% this year, followed by an increase of 38% in 2015. This compares very favourably to Rio Tinto, which is set to increase EPS by 12% next year, while BHP Billiton disappoints on this front, with a fall in EPS of 3% expected next year.

Should you invest £1,000 in BHP right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BHP made the list?

See the 6 stocks

Different Valuations

However, Glencore’s strong growth prospects appear to be at least partly priced in by the market. For example, it currently trades on a price to earnings (P/E) ratio of 15.8, which is considerably higher than the P/Es of 10.8 and 12.5 for Rio Tinto and BHP Billiton respectively. Therefore, it is clear that value investors may prefer to stick with the cheaper, albeit slower growing, BHP Billiton and Rio Tinto, rather than seek out higher growth at a higher price.

Looking Ahead

Indeed, all three companies have their strengths and weaknesses. For example, Rio Tinto appears to offer the best mix of great value and strong growth prospects, but it relied on one commodity (iron ore) for over 90% of its 2013 earnings, thereby showing how little diversification it offers investors. On the flip side, BHP Billiton is very well diversified, but is set to post lower earnings next year. Meanwhile, Glencore, while it offers the highest potential growth rate, is already nearly 50% more expensive than Rio Tinto based on their respective P/E ratios.

So, with the mining sector’s outlook remaining uncertain and the macroeconomic outlook for China only beginning to improve, investors may be well advised to spread the risk among all three companies. That way, investors can tap into diversification, strong growth rates and great valuations.

Should you buy BHP now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter owns shares in BHP Billiton.

More on Investing Articles

Young female business analyst looking at a graph chart while working from home
Investing Articles

After collapsing 28% today, are Bunzl shares too cheap to ignore?

A poor trading statement has sent Bunzl shares to multi-year lows. Could now be a good time to consider investing…

Read more »

Investing Articles

These 5 stocks could earn £1,600 of annual passive income in a £20,000 ISA

Harvey Jones shows how to generate a high and rising passive income by buying a balanced mix of high-yielding FTSE…

Read more »

Young woman holding up three fingers
Investing Articles

3 things I like about Greggs shares

Greggs shares have tumbled by more than a third over the past year. But this writer has no plan to…

Read more »

artificial intelligence investing algorithms
Investing Articles

Nvidia stock: beware the bear market rally

Andrew Mackie argues that investors should tread carefully before investing in Nvidia stock, as the worst of the sell-off could…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Up 73% in one year, is this the best value stock in the FTSE 100?

A brilliant run of form suggests this FTSE 100 giant should no longer make the cut as a value stock.…

Read more »

Investing Articles

The best could yet be to come for UK shares! I’m buying these ones

Amid ongoing stock market turbulence, this writer's been adding selected UK shares to his portfolio. Here's why and what he…

Read more »

Top Stocks

4 UK stocks trading well below book value to consider buying

Sometimes, it pays to be contrarian: who says the UK market has priced a stock precisely right, anyway?

Read more »

Investing Articles

The S&P 500’s 12% off its highs. Is now a good time to buy US shares for an ISA?

Right now, a lot of British investors are wondering whether it’s a good time to buy US shares. Here, Edward…

Read more »