I rate mining giant Glencore (LSE: GLEN) as an attractive FTSE 100 investment. But as I’ll explain, I think it’s definitely one for long-term investors only. The Glencore share price slumped when the Covid-19 pandemic hit, which isn’t surprising. When the world’s economies are on hold, demand for metals and minerals suffers.
But since the lowest point in the 2020 stock market crash, Glencore shares have come bouncing back ahead of the FTSE 100. The Glencore price has climbed by 57% since the March bottom, while the Footsie has regained 26%.
The commodities business is notoriously cyclical, so we should expect ups and downs from the Glencore share price. But the coronavirus plunge has made cyclicality look a lot riskier this year. Looking back over the past five years, Glencore has been extremely volatile. And today, even after the partial recovery, we’re still looking at a five-year fall of around 30%.
Glencore share price erratic
But I think we need to look beyond five years to see the real value here. This is a stock that might appear to fall between two stools. Should we buy Glencore for share price growth? In terms of traditional growth stocks, it’s a no from me. Glencore is in a highly competitive market that’s largely saturated, and demand can really only ever grow gradually.
What about buying Glencore as an income stock? Well, dividends from miners can be erratic too, and Glencore hasn’t paid any for the past few years. Many dividend investors want to see a steady reliable income, and Glencore does not satisfy that requirement.
But when the dividends are flowing, they tend to provide decent yields. And if you buy when the price is depressed, you can lock in future dividends at an effectively higher yield. Current forecasts put the 2020 yield at 4.3%, rising to 5.8% in 2021.
That’s obviously somewhat speculative at this point, but I think now is a good time to be thinking about it. Glencore will release a half-year production report on 31 July, with first-half results due on 6 August. We have time to prepare our expectations.
Legal troubles
Saying all this, the company does face a number of other problems, including legal ones. And they could impact the share price in the medium term. My Motley Fool colleague Kirsteen Mackay has explained the issues, so I won’t repeat it all here. But, when doesn’t a miner face problems?
I certainly don’t want to downplay these issues, and investors really do need to take them into account. But I think we’ve just seen a time of maximum pessimism. A time, in the words of Warren Buffett, to be greedy when others are fearful. Right now, the Glencore share price makes me want to be greedy.
I’d buy, but for the very long term. Usually I’d recommend not buying a stock unless you plan to hold it for at least five years. I see Glencore as one to buy and forget for at least a decade.
