Only a grand cheap fooks!9 Jan 2019 09:17
Bright outlook
I would invest £1,000 in Glencore today because I’m so optimistic about the outlook for the shares. First of all, they are exceptionally cheap. At the time of writing, shares in Glencore are trading at a forward P/E of just 7.7. Then there’s the dividend yield to consider. Analysts believe the company will distribute a total of $0.21 per share in 2018, giving a dividend yield of 5.7% on the current share price.
There are some risks here. Last year, the group was hit by concerns about political uncertainty in the Democratic Republic of Congo, where it mines just over a quarter of the global output of cobalt. A new mining code that was signed into law in June sparked tensions between the company and the government. Investors have also taken fright after the US government announced it was investigating Glencore over bribery and corruption allegations.
It is impossible to quantify how these developments will affect the company over the long term at this point because information is limited. However, I am confident that over the next 12 months, as more information becomes available, investors should return as the cloud of uncertainty is lifted. In the meantime, they can look forward to a 5.7% dividend yield.
Continue to thrive
The problems above are confined to a relatively small part of the Glencore empire. The rest of the business should continue to thrive in 2019 as the company meets the world’s insatiable demand for essential commodities such as coal and copper.
Glencore is also the world’s largest commodities trader, which gives a substantial competitive advantage over almost every other mining enterprise in the world. That’s why, despite the company’s current problems, I would invest £1,000 in the share price today.
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