These FTSE 100 stocks surged in October. Can they keep charging?

Royston Wild considers the share price potential of two FTSE 100 (INDEXFTSE: UKX) rockets.

| 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.

Metals mammoth Rio Tinto (LSE: RIO) punched further terrific share price gains in October as ‘safe-haven’ flows into the commodities sector persisted. The earth mover rose 8% last month, meaning Rio Tinto has gained well over a third in value since June’s EU referendum.

The business was lifted by an incredible uptick in iron ore values in October — Rio Tinto sources 60% of total earnings from this one market. The steelmaking ingredient hit its highest since April towards the end of the month and has continued to climb as we enter November, iron ore recently trading around $65 per tonne.

However, the scale of iron ore’s stunning rise in 2016 has led many to question that speculative buying rather than robust, fundamental trading is at play.

Sure, factory data from China has been more encouraging, the Caixin PMI manufacturing gauge leaping to 51.2 in October, the highest level since summer 2014. But export data from the country signals that underlying global demand for China’s goods could be taking a turn for the worse — outbound shipments sank by an alarming 10% in September in dollar terms.

It’s difficult to rule out further near-term share price rises at Rio Tinto given that iron ore values continue to stride skywards.

But with major suppliers embarking on ambitious supply expansion plans, and demand indicators far from reassuring, I believe Rio Tinto remains a scary pick for long-term investors.

Switch out

The earnings prospects of Barclays (LSE: BARC) could also be described as rather sticky, in my opinion, despite last month’s splendid 13% share price ascent.

Indeed, the FTSE 100 bank’s latest set of quarterlies that were released last month underlined the variety of problems facing it in the near term and beyond.

Barclays was forced to stash away an extra £600m during July-September for the ongoing PPI-mis-selling scandal. The London-based business has now set aside an astonishing £8.4bn to cover claims, the latest provision reflecting the FCA’s decision to extend a proposed submission deadline to 2019.

But this isn’t Barclays’ only problem, the company facing the possibility of a sharp deceleration in the British economy as it adjusts to June’s EU referendum. Added to the prospect of a sharp rise in bad loans, falling consumer spending power and cooling business activity, Barclays is likely to also face the Bank of England keeping interest rates locked around record lows to stop the economy from flatlining.

The shedding of non-core assets like Barclays Africa Group provides the financial colossus with less insulation from the troubles facing its home markets. And Barclays’ profitability could also take a hefty whack should EU passporting obstacles happen during the government’s Brexit negotiations.

The vast array of problems facing Barclays makes it an unsuitable pick for cautious investors, in my opinion, a situation that could lead to a heavy share price reversal in the months ahead.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »