March has turned out to be a busy stock-trading month for me, with the purchase of shares in three high-quality companies I believe have great long-term potential.
Although I won’t be able to max out my stocks and shares ISA this tax year, I still have some savings that I intend to transfer before the all-important 6 April deadline. And the beauty is I don’t need to invest that money straight away. Instead, I will wait for an opportunity before swinging my bat at my watchlist.
Commodities giant
The Glencore (LSE: GLEN) share price has fallen 22% since peaking in January. This has pushed its dividend yield to 8%, twice the average of the FTSE 100. But it’s the long-term growth story that really interests me.
Decarbonisation and the drive for net zero is undoubtedly the number one macro trend today. But the reality is that the world will never reach its 2050 goals unless there is a significant ramp up in mining activities.
I believe the present price of metals including copper, cobalt, zinc and nickel don’t reflect this, and will be repriced accordingly in the future. That said, I still expect its share price to remain volatile in the years ahead. But I’m comfortable with this level of risk.
Silver play
The Fresnillo (LSE: FRES) share price had been falling long before the release of disappointing 2022 results. Since mid-January, it fell nearly 30%. As a believer that silver is the cheapest metal on the planet, I took advantage of stock market irrationality.
Silver is a quite extraordinary, versatile metal. It is a monetary metal, which has been a store of wealth for hundreds of years. It also has many industrial applications. With the greatest electrical and thermal connectivity of all metals, silver is a key component in solar panels, semiconductors and electric vehicles.
Its share price often moves in sync with the silver price. Given that this commodity can act very explosively (both up and down), I’m expecting the road to be bumpy. However, it’s a risk I’m willing to take for the opportunity to potentially deliver outsized returns.
The yellow metal
The final share I bought in March was Egypt’s largest gold producer Centamin (LSE: CEY).
In 2022, it produced 440,974 ounces of gold, realising an average selling price of $1,794oz. However, its all-in sustaining cost (AISC) of $1,399, is significantly higher than the industry average of around $1,280. This fact is attributable to operational issues at its Sukari gold mine.
But what has escaped the attention of investors is that the gold price has been steadily rising and recently hit $2,000.
Doing some basic maths, I can see that Centamin’s margins have increased from $400 to $600 an ounce. To put it another way, its profitability has risen by 50%. Yet its share price has barely moved.
Centamin is expecting its AISC to fall in the medium term. It is also has a healthy exploration pipeline, which has the potential to increase gold output significantly.
I’m expecting the price of gold to continue to increase in the next few years. China has been steadily reducing its exposure to US Treasuries and instead buying gold. In an attempt to restore credibility in their currencies, central banks have been large buyers too.
