Glencore (LSE:GLEN) shares are currently trading 20% below their 2023 high, with a juicy dividend yield of 7%.
The Anglo-Swiss commodities king is a leading producer of metals like copper, cobalt, zinc, and nickel. These metals are all indispensable ingredients for burgeoning green technologies.
Could this be a golden chance to scoop up shares in Glencore for my portfolio?
Harvesting value
Glencore’s sale of its stake in agricultural arm Viterra – announced earlier this year – is a significant step towards portfolio optimisation, according to Citi analysts.
Valued at $4.1bn, this cash-and-stock transaction merges Viterra with US rival Bunge. This move simplifies Glencore’s portfolio and focuses it towards the green metals complex.
In addition, Citi has temporarily suspended its rating on Glencore due to the merger, leaving us with fertile ground for speculation.
Arms-length coal goal
At the same time, Glencore has entered into a dogged bidding war for the coal unit of Canadian miner Teck Resources. How can we square that with the company’s pivot towards greener business goals?
Well, analysts say Glencore is aiming for a demerger of its own coal and carbon steel materials business with that of Teck Resources.
As a result, this strategic move would separate the rest of Glencore’s assets from coal. This could be a prudent decision in an industry increasingly distancing itself from what some consider a ‘dirty’ fuel.
“There’s a merry-go-round of coal assets in the industry as companies don’t want to be left holding what is seen as a dirty fuel“, said AJ Bell analyst Russ Mould in a research note.
Powering progress
At the same time, Glencore has ambitious plans to establish Europe’s largest electric car battery recycling plant.
In a world striving for sustainability, the demand for copper, a key component of green technologies, should surge.
Glencore, among the biggest global copper miners, finds itself at the forefront of this race.
Moreover, the US Inflation Reduction Act further fuels this demand, promising a green industry boom.
With a strong balance sheet and attractive valuation, Glencore is well-positioned to energise my portfolio with its focus on the red metal’s future prospects.
Am I buying?
Glencore seems to be re-structuring its business to get the maximum bang for shareholders’ bucks. In my view, it is doing this by doubling down on the green metal element of its global commodities empire. At the same time, it is putting agriculture and coal on the back burner.
With shares currently trading 20% below their high earlier this year, this may be a once-in-a-decade buying opportunity. Glencore looks historically cheap with a price-to-book ratio of 1.36, compared with 1.6 in 2022.
Fears of a global recession have dampened commodities prices in 2023. If we slide into bad economic times, I could get burnt by being too exposed to industrial commodities that rise and fall with the waves of global growth.
Over the long term, I’m confident Glencore could be a good investment for my portfolio, however. I’m watching the company carefully, and I plan to buy shares in the near future.
