Diversified commodity miner and marketing company Glencore (LSE: GLEN) has been benefiting from higher prices. Most metals and resources such as oil have been riding high lately and that has improved the cash flowing into Glencore’s business.
The improving situation is reflected in the share price. At 426p, it’s risen by just over 40% in the past year. But there could be more to come over an extended period.
Big in the growth area of nickel
One growth area within the firm’s operations is its well-established nickel business. The company has been optimising its nickel infrastructure for decades. And the complexity of the operation suggests to me there could be high barriers to entry for would-be competitors.
Meanwhile, around 70% of nickel production goes to making stainless steel. But there’s a growing demand for nickel in the electric vehicle (EV) industry and other sectors. Indeed, it’s the most important metal by mass in the lithium-ion battery cathodes used by EV manufacturers.
And the metal’s wide useage may not be surprising when we consider its properties. For example, nickel can be disinfected, it’s corrosion resistant, it’s strong at high and low temperatures, and it has excellent electrical and magnetic properties.
Glencore reckons nickel is everywhere in the modern world but we rarely know it. So it has a reputation as being a ‘hidden’ metal. But one of the important factors for Glencore is there’s “virtually no other metal that will do the same job as nickel”.
Another feature of the nickel industry is that recyling obsolete kit produces more useable nickel. And Glencore is ready to benefit from that angle of the industry as demand grows in the years ahead.
However, the commodity industry is known for its cyclicality and that adds risks for Glencore shareholders now. But the company’s forward-looking dividend yield is running above 6% for 2023. And that valuation tempts me, despite the uncertainties.
Well placed for long-term growth
I’m also keen on the long record of multi-year growth delivered by Computacenter (LSE: CCC). The company describes itself as an independent technology partner. And that means it provides structured solutions and resources for large corporate and public sector customers. Computacenter helps them select, deploy, and integrate digital technology to achieve their business goals. And, day to day, Computacenter maintains, supports, and manages information technology (IT) infrastructure and operations for its customers.
I’ve been impressed how the business has maintained its growth trajectory over many years. And that suggests to me the company is well placed in its markets. Indeed, January’s trading update and outlook statement is upbeat. And the firm said its product order backlog is at “an all-time high and considerably larger than a year ago.”
Meanwhile, City analysts expect earnings to come in essentially flat this year and the share price has been consolidating. I’m inclined to use the pause in momentum to buy some of the shares to hold for the long term.
There are no guarantees of a positive investment outcome, of course, because past performance is not always a good guide to the future. And with the share price near 2,746p, the forward-looking P/E ratio is just below 18 for 2022, which isn’t a bargain-basement valuation.
Nevertherless, I see this as a quality enterprise and would be willing to take on the risks of share ownership.
