Why I’d avoid Sirius Minerals plc and buy this superstock instead

Sirius Minerals plc (LON: SXX) has a big story to tell but I’m drawn to this superstock.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Sirius Minerals (LSE: SXX) have risen around 26% over the past month. As a short-term speculation, that’s a decent return and I’d be taking profits now if I held the stock.

However, many investors are in this one for the long haul. After all, the company signs off its promotional video saying “Sirius Minerals. The future of fertilizer,” which is a mighty prediction to make, inspired no doubt, by the estimated 2.6bn tonne high-quality polyhalite potash resource that the company owns in Yorkshire.

Volatility ahead

But before Sirius can start mining and shipping its Poly4 multi-nutrient fertilizer product from Teesside to eager, pre-committed customers around the world, there’s the ‘small’ matter of building the mine and transportation systems, which is a massive and expensive construction project fraught with uncertainty. Long-term shareholders should hunker down ready for more volatility in the stock over the coming years – the share price is up over the past month, but my prediction is that it will fall again, then rise, then fall over and over again for some considerable time to come mirroring the ups and downs of the firm’s operational progress. So, I’m in no hurry to make a long-term commitment to the stock.

Should you invest £1,000 in Greggs Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Greggs Plc made the list?

See the 6 stocks

Highlights in the recent full-year report confirm that the construction project started during 2017 and that the firm has signed incremental supply agreements with customers for 4.4m tonnes per annum. Chief executive Chris Fraser said in the report: “Our world-class project based in North Yorkshire has the potential to disrupt the global fertilizer market and contribute substantially to the UK economy.” The story here is an exciting one, but with Sirius only just having entered into a design-and-build agreement with Canadian firm DMC Mining Services to sink the four shafts required for the project, there’s a long and winding road ahead before we see first profits.

Boring but good

Meanwhile, boring-but-already-profitable manufactured masonry products provider Forterra (LSE: FORT) delivered rather decent-looking full-year results today with revenue more than 12% higher than a year ago, adjusted earnings per share almost 17% up and adjusted operating cash flow rising more than 29%.

The strong cash flow performance enabled the firm to reduce its net debt by around 34% to £60.8m at 31 December 2017, which is a comfortable-looking 0.8 times the value of adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). The directors expressed their confidence in the company’s financial strength and the trading outlook by pushing up the total dividend for the year by 10.5% — nice!

Chief executive Stephen Harrison told us in the report that the main driver of revenue growth in 2017 was the new-build residential market together with the “strategically important” acquisition of Bison, which “has given us a leadership position in the precast concrete products market.” City analysts following the firm expect earnings to grow 6% in 2018 and 8% in 2019, which looks like steady progress. You can pick up the shares on a forward P/E rating a little over 109 for 2009 at today’s share price around 294p and there’s a 3.8% forward dividend yield. I think the firm is well worth your further research time.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

piggy bank, searching with binoculars
Investing Articles

An underrated value stock? I think investors should take a closer look

This value stock appears overlooked by the market. And that’s quite rare right now as the stock market recovers from…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Up 35% in a month! But is this electrifying UK growth share a total gamble?

Harvey Jones wishes he'd had a flutter on gaming group Entain last year, as it's now smashing the FTSE 100.…

Read more »

Investing Articles

Should I buy the most popular FTSE 100 stock on AJ Bell?

Our writer can see the appeal of this recently popular dividend stock from the FTSE 100 index. But will he…

Read more »

Cargo containers with European Union and British flags reflecting Brexit and restrictions in export and import
Investing Articles

UK shares are booming again as the FTSE recovers! Here’s what I’m watching

Mark Hartley takes a deep dive to see which UK shares are lagging behind in the current market rally. Has…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

I bought 1,779 Legal & General shares 2 years ago – see how much dividend income I’ve got since

Harvey Jones holds Legal & General shares and has been pretty underwhelmed by their performance so far. The dividend is…

Read more »

Middle-aged black male working at home desk
Investing Articles

Is the FTSE 100 set to soar? Here are 3 ways to aim to cash in

My outlook for the FTSE 100 is definitely brightening as we get deeper into 2025. How can we make the…

Read more »

Investing Articles

£10k invested in NatWest shares on the ‘Liberation Day’ dip is today worth…

Harvey Jones looks at how NatWest shares have been knocked off course during recent market turbulence, but are now bouncing…

Read more »

Tariffs and Global Economic Supply Chains
US Stock

£5,000 invested in Nvidia stock just before the tariff news is now worth…

Jon Smith talks through the erratic movements in Nvidia stock over the past six weeks and reveals where an investor…

Read more »