3 Reasons To Be Bullish On The Resources Sector: Glencore PLC, Centamin PLC And Falkland Oil And Gas Limited

These 3 resources stocks have very bright futures: Glencore PLC (LON: GLEN), Centamin PLC (LON: CEY) and Falkland Oil And Gas Limited (LON: FOGL)

| 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.

The old saying ‘buy low and sell high’ is excellent advice but, due to emotions, is tough to put into practice. In fact, buying when a share price is low takes either a lot of courage, or a lot of logic and it can be difficult to find either of those attributes when the outlook looks dire.

However, share prices are never low without good reason and, in the case of the resources sector, the future prospects for a range of commodities seem rather pessimistic. For example, there is a global demand/supply imbalance in the oil sector that is showing little sign of correcting, while fears of a financial meltdown are not strong enough to push the gold price higher. Similarly, a range of other commodities are struggling to post any price growth due to oversupply and weak demand – especially from China which continues to endure a so-called ‘soft landing’.

Despite this, there are reasons for investors in resources stocks to cheer. As mentioned, the time to buy any stock is when it is low in price and, on this front, the likes of Glencore (LSE: GLEN), Centamin (LSE: CEY) and Falkland Oil & Gas (LSE: FOGL) all appear to fit the bill.

For example, Glencore remains one of the best diversified and most financially sound mining companies in the world. And, while it has seen its bottom line come under severe pressure in recent years, its financial performance over the next two years is set to be significantly better, with double-digit growth forecast in both the current year and next year. Despite this, Glencore trades on a price to earnings growth (PEG) ratio of just 0.3, which indicates that despite falling by 8% since the turn of the year, Glencore’s share price could soar over the long run.

Similarly, gold producer, Centamin, also offers growth at a reasonable price. Like Glencore, it has a PEG ratio of just 0.3 and, with the price of gold being much more stable than that of other commodities, Centamin’s outlook may prove to be more positive than the market is currently pricing in. Furthermore, Centamin has the scope to become a top notch income stock even though it has a yield of just 2.7%. That’s because, with a payout ratio of just 31%, it has tremendous scope to increase dividends and offer a potent mix of growth, value and a great income.

Meanwhile, Falkland Oil & Gas trades at a considerable discount to its net asset value. In fact, it has a price to book (P/B) ratio of only 0.62 and this indicates that the oil explorer has a considerable margin of safety so that even if there are asset writedowns, its shares may not be hit as hard as may be anticipated. Furthermore, Falkland Oil & Gas has sound finances and upbeat prospects from its drilling programmes, which have the scope to boost its share price over the medium term.

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 Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Google office headquarters
Investing Articles

1 reason I like buying S&P 500 shares – and 1 reason I don’t

Will this investor try to improve his potential returns by focusing more on S&P 500 shares instead of British ones?…

Read more »

Young woman holding up three fingers
Investing Articles

3 SIPP mistakes to avoid

Our writer explains a trio of potentially costly errors he tries to avoid making when investing his SIPP, on an…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Here’s how (and why) I’d start buying shares with £25 a week

Our writer uses his investment experience and current approach to explain how he would start buying shares on a limited…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s my 5-step approach to earning passive income of £500 a month

Christopher Ruane explains the handful of steps he uses to target hundreds of pounds in passive income each month.

Read more »

Investing Articles

2 UK shares I’ve been buying this week

From a value perspective, UK shares look attractive. But two in particular have been attracting Stephen Wright’s attention over the…

Read more »

Investing Articles

A lifelong second income for just £10 a week? Here’s how!

With a simple, structured approach to buying blue-chip dividend shares at attractive prices, our writer's building a second income for…

Read more »

Investing Articles

Here’s how I’d use a £20k Stocks and Shares ISA to help build generational wealth

Discover how our writer would aim to turn a £20k Stocks and Shares ISA into a sizeable nest egg by…

Read more »

Investing Articles

Billionaire Warren Buffett just bought shares of Domino’s Pizza. Should I grab a slice?

Our writer takes a look at a few reasons why Domino's Pizza stock might have appealed to Warren Buffett's Berkshire…

Read more »