American construction play
Ashtead Group (LSE: AHT) is up over 30% since the middle of February. This was on the back of some decent economic data from the US, where Ashtead operates. Full year results, released a week ago, were extremely impressive — revenue shot up by 19% and profit before tax rose by 24%, to £645m (at constant exchange rates). This quality performance has lead management to raise the final dividend by 48% to 22.5p.
CEO Geoff Drabble recently said that
“end markets remain strong, the structural drivers are still in place and we have a strong balance sheet which allows us to execute our plans responsibly. As a consequence, the Board continues to look to the medium term with confidence.“
This should give investors confidence that the company will continue to operate well and grow profits for the next few years.
Silver in demand
Precious metals have been in demand this year, as investors have looked for a safe haven for capital. This has been perfect for Fresnillo (LSE: FRES) as although it focuses mainly on silver, it also produces gold, and small volumes of lead and zinc. On the back of strong silver prices Fresnillo shares have been flying and the share price has doubled since October. The company is aiming to produce between 49-51m ounces of silver this year,which will make it the biggest silver producer in the world. All of the companies core assets are in Mexico which is helpful in lowering administrative costs.
Fresnillo’s shares trade on a price to earnings ratio (P/E) of over 100 and pay a small dividend yield of 0.3%. This should indicate the shares are overvalued, but I still think it’s a fantastic leveraged play on the silver and gold price.
Commodities bounce
After a dismal 2015 Glencore (LSE: GLEN) has bounced back strongly. The shares are up over 100% since early January and the momentum shows no sign of stopping yet. The company has benefited from the increase in commodity prices across the world. Glencore has also been sorting out its balance sheet through asset divestments and reorganisation of its debt facilities. This has been well received by the market and investors have been buying shares.
The reorganisation of the balance sheet has allowed Glencore to operate more efficiently at lower commodity prices. It should also ensure the future of the company, should prices stay low for much longer. I think Glencore offers a good risk to reward profile and, when commodity prices begin to rip higher again, Glencore should be in a perfect place to take advantage of it.
I believe these three shares could be very good investments in the medium term and at current prices they are worth further research. If technical momentum and good fundamentals come together in a stock it can lead to an explosive rise and I believe this could happen to these three companies.
