Everyone is on the lookout for cheap shares. But sometimes stocks are cheap for a reason, and that’s why it pays us to really do our research.
So let’s have a look at the beaten-down shares bought by investors on the Hargreaves Lansdown platform last week. Should I add them to my own portfolio?
Glencore
Glencore (LSE:GLEN) is on something of a bull run — the trading and mining giant is up a phenomenal 43% over 12 months. The stock has defied concerns around a weakening global economy, and surged in the autumn.
The Swiss-headquarted firm was on track to deliver record profits on the back of high oil and coal prices in 2022 — and it probably will. Earnings before interest and tax (EBIT) in the first half reached $3.7bn. Glencore’s autumn surge is also in spite of the firm posting sharp declines in the output of several industrial and precious metals in 2022.
And Glencore currently trades with a price-to-earnings (P/E) ratio of six. That’s pretty cheap.
So should I invest?
I see Glencore as a solid investment for the long run, but I don’t want to buy during a bull run. Its main products include copper, cobalt, zinc, nickel and ferroalloys. Ferroalloys and copper are integral to infrastructure development — something we will likely see a lot more of in the next decade.
Meanwhile, cobalt, zinc and nickel have seen demand surge due to the electrification agenda. On average, EVs need 39.9kg of nickel and 13.3kg of cobalt per car.
My issues are the recent surge and concerns about a global recession in 2022 — this would have a negative impact on resource prices. As such, I’m not buying just yet.
Dr Martens
Dr Martens (LSE:DOCS) shares collapsed last week, falling 20% when the market opened on 19 January. The fall came after the company warned that profits will be lower than expected this year, due to problems with its US operations.
But last week, it was also the fifth most bought stock in terms of share quantity. In fact, Dr Martens shares accounted for 1.2% of all shares bought on the Hargreaves platform.
Shares in the fashionable bootmaker have now fallen by over 65% since its January 2021 flotation. It’s also down 59% over 12 months.
Due to its US challenges, the firm now expects full-year revenue growth of 11-13% and earnings before interest, tax, depreciation and amortisation of between £250m and £260m. It had previously guided towards revenue growth in the high teens.
Dr Martens currently trades with a P/E of around 8. That’s certainly not expensive, and in-demand brands tend to trade with higher multiples.
Broadly, I think it’s a brand with a positive future, and near-term performance could be lifted by China’s reopening.
However, I’m a little cautious given the two profit downgrades and the volatility of the stock. I’m keeping a close eye on this one, but I’m not buying yet.
