FTSE 100 commodity trading and mining company Glencore (GLEN:LSE) started September with an opening share price of £2.37 and closed on the September 30 at £2.44, this was an increase of 3%.
At the beginning of September, Deutsche Bank said stocks were due a rebound after the summer sell-off. Mining is a cyclical share, and a correction during the summer months is commonplace. I think this overall 3% increase for the Glencore share price can probably be put down to its cyclical nature.
The price peaked on the September 13 at a rise of over 10%. This was due to the price of copper and zinc both rising on the day.
Political headwinds
There is no doubt that political tensions continue to pressure the Glencore share price, which is reflected in its subdued price of late. The US-China trade war has dragged on and dampened spirits. Many investors fear China’s demand for commodities will decline in the same way it did in 2015, but Deutsche Bank doesn’t think this will happen. Of course, as global growth fears put pressure on stock prices and reduce appetite for risk, it’s important to remember this can also be the perfect time for investors to buy.
Warren Buffett, arguably the world’s greatest stock investor, with a net worth of $81.8bn, has been quoted many times for his sage advice. In his shareholder letters, he reminds investors to keep a level head and not focus too closely on the daily fluctuations of the stock market. It’s better to own shares in a company you’re confident will do well over the long term than something that might not survive a downturn.
One of Buffett’s famous quotes is “Price is what you pay. Value is what you get.” So, although buying bargain stocks in a recession is a great plan, it’s important not to get carried away. It won’t be a bargain if it doesn’t survive the downturn. For example, I’m steering clear of some UK retail stocks such as Ted Baker until the Brexit drama is well and truly behind us.
Glencore, with its £30bn market cap, I think is worth looking at. Although most definitely in the riskier share basket, it’s more recently been considered a lucrative income share. In 2018 it distributed £5.2bn in dividends and buybacks to shareholders.
Safety and security
Unfortunately, mining in underdeveloped parts of the world is a risky business. Back in June, 40 people died at its Kamoto copper mine in the Democratic Republic of Congo, after part of it collapsed, a human tragedy that underlines the risk not for investors, but for those actually producing the wealth.
The FTSE 100 giant has a high trailing price-to-earnings ratio of 37 and low earnings per share of 6.2p, but its forward dividend yield is an impressive 7.21%. CEO Ivan Glasenberg upped his stake in Glencore from 8.31% to 9% on October 9. This is a positive move as he previously confirmed he intends to leave the company between 2021 and 2023.
Another positive turn of events this week occurred when it was announced that Glencore will provide a minimum of 61,200 tonnes of Cobalt to China’s GEM Co. Ltd between 2020 and 2024. This extends their cobalt partnership and further supports GEM’s continued contribution to the Chinese New Energy Market.
Although I think this is a risky share, it has an attractive dividend yield. Investing in it all depends on your risk-tolerance.
