If I had invested in Glencore (LSE:GLEN) five years ago today, the shares would now be worth 180% more and I would have made a tidy very profit. Even if I’d bought in six months ago, my investment would have gained 70%.
So goes the world of stock market investing. Hindsight analysis is plentiful, as it’s always easier to see the bigger picture in the months and years following an investment, or non-investment in my case.
It’s been a topsy-turvy few years for Glencore, as the share price has dipped and risen on a number of occasions. In the last year for example, Covid-19 has not had a significant effect on the shares. In fact, Glencore stock has risen 23% during the last year. Looking at the last three years however, the shares have slid 25%.
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As always, past performance is never an indicator as to the future price of a stock. With that said, where do I think the Glencore share price is headed?
Earnings report
The FTSE 100 mining company released its annual earnings report on Tuesday. In it, Glencore reported a 34% decline in revenues to $142.34bn. Its net loss widened by 371% to $1.9bn, equating to a loss of 14 cents per share.
The earnings report wasn’t all bad, however. The company reported its net debt to have narrowed more than originally expected, by around 10% to $15.84bn.
On that more positive news, Glencore reinstated its dividend payout of 12 cents per share, which was enough to boost the share price 2% in Tuesday trading.
Carbon neutral by 2050
The company is caught between a reliance on its coal assets and a commitment to becoming carbon neutral by 2050. It is planning to phase out its coal mining operations in order to focus more on metals like cobalt and copper, which will be essential to the growth of electric vehicle use.
Glencore is aiming to do this gradually. I think this policy makes sense to lessen the impact of losing the material responsible for a third of its earnings.
Rising commodity prices have contributed to the share price rising over the last few months. Industrial metals in particular have seen a boom and will have aided Glencore’s performance. If this were to continue there is a strong argument that the Glencore share price would follow that upward trend.
I wouldn’t be overly confident of that being the case though. Commodities markets have historically been volatile, and particularly reactive to economic and geopolitical events. And there has been plenty of both to deal with in recent times.
The volatility of the Glencore share price itself reflects that, and is the main reason why I won’t be adding it to my portfolio right now.
There are plenty of others who are convinced about the potential for Glencore shares to grow, however. It will be a stock I will be keeping my eye on, for sure.
