1 FTSE 100 stock to try to beat inflation

Inflation is coming but there are ways to beat it. Zaven Boyrazian looks at one FTSE 100 stock ready to dominate in a world of higher prices.

| 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.

Fears of rising inflation have started having a tangible impact on many businesses, even those in the FTSE 100. But there are a handful of sectors that can actually benefit from the rising prices. One industry in particular is mining.

Global supply chains continue to be disrupted by the pandemic as well as by labour shortages. As a result, the price of most metals has been climbing substantially over the past year, especially those related to electric vehicle batteries. While product manufacturers are less than pleased, these inflated prices are fantastic news for mining businesses. And with that in mind, here’s one FTSE 100 stock that, in my eyes, looks well placed to beat inflation.

A global leader in resource extraction

Glencore (LSE:GLEN) is one of the top producers of battery metals like copper, cobalt, and nickel, among others. Since the start of the pandemic, some of these materials have reached their highest price point in over 25 years. And so, it’s not surprising to see the Glencore share price thriving while the rest of the FTSE 100 index struggles to recover.

Over the last 12 months, this stock has risen by more than 100%. But looking back to the start of lockdowns in March 2020, the performance is closer to 200%. This explosive growth from what has traditionally been an income investment has pushed the share price beyond pre-pandemic levels. And it’s now close to returning to its highest point in nearly a decade.

As the world shifts towards renewable technologies, I think the demand for battery metals will only continue to rise. And with the impact of Covid-19 on Glencore’s mining activities getting smaller, it looks primed to continue growing, outperforming inflation by a big margin.

Even FTSE 100 companies carry risks

As exciting as the opportunity appears, it’s far from risk-free. Demand for battery metals may not weaken for quite some time. However, elevated prices boost the financial viability for other smaller mining businesses to step into the arena. In other words, supply will undoubtedly start rising. And as constraints on availability begin to loosen, resource prices will naturally fall.

This has happened numerous times throughout history. And with the business ultimately tied to the cyclical market prices of its extracted metals, Glencore shares will start falling again as price inflation eventually reverses.

But beyond this cyclical threat, running a mining business comes with its own host of challenges. Securing drilling permits, complying with country-specific regulatory restrictions, and minimising environmental damage are all expensive. Being a large FTSE 100 business helps makes this more affordable. But if the firm is discovered to be in breach, it could be the target of big legal penalties.

This FTSE 100 stock can beat inflation but there is risks

The bottom line

Inflation is often seen as a bad thing. And in most cases, especially for consumers, that’s true. But it also breeds new investment opportunities. Therefore, despite the risks, I am considering adding this FTSE 100 stock to my portfolio to try and outperform the market over the long term.

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.

Zaven Boyrazian 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.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

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

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »