Up 25% in 1 month this FTSE 100 stock has explosive potential

After struggling for traction over the last three years, this FTSE 100 stock is beginning to make a move. This Fool sees a lot more to come.

| More on:

Image source: Getty Images

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.

Despite the FTSE 100 recently hitting an all-time high, there are still a number of stocks that trade at historically low valuations. One industry that continues to be shunned by investors of all types is precious metals miners. But with gold decisively breaking out above $2,000, the train looks about ready to leave the station.

New gold cycle

I continue to believe that we are in the very early innings of another bull market for precious metals. To get in on it, I could buy gold and silver bullion. As a direct consequence of inflation, Costco is tapping into consumer interest by selling gold bars in the US. But I need to consider storage costs.

Another way is to buy shares in an ETF. For large-cap stocks, VanEck Gold Miners is the most popular. However, I want to beat the benchmark index, so my choice is individual stocks. My personal favourite in the FTSE 100 is Fresnillo (LSE: FRES), the world’s largest primary silver producer and Mexico’s largest gold miner.

Exploration potential

There are over 3,500 publicly traded mining and metals stocks globally. That’s more choice than in any other industry. The issue is that the vast majority are junior explorers. These don’t own revenue-generating mines, just a hope of finding the next big discovery.

Investing in junior gold mining stocks has the potential to generate life-changing sums of money. But without specialist knowledge of geology, geophysics, and geochemistry, I wouldn’t know how to interpret their drilling results. And I always remember the words of Mark Twain: “a gold mine is a hole in the ground with a liar standing on top of it”.

Many of its larger peers, including Barrick Gold and Newmont, have little appetite for exploration. Their strategy is growth by means of acquisition. Fresnillo is different. Not only does it have eight major active mines, but it also has a very good track record of finding new discoveries and taking them into full production.

Major risks

Investing in precious metals miners is by its very nature, risky. Fresnillo itself has suffered many setbacks lately. A tight labour market and revaluation of the Mexican peso relative to the US dollar were two of the biggest in 2023. And like every other mining company out there, supply chain issues and inflation continue to erode margins.

I am not a gold bug. I invest where I see opportunity. And to me, precious metals represents one of the best opportunities at the moment.

While most investors continue to chase mega-cap tech stocks and believe that AI is about to imminently transform the world, I take a completely different stance.

Unsustainable debt and government deficits across many Western economies, most notably the US, is resulting in inflationary pressures.

The world today is hungry for commodities. This is evident from the huge investments being made in green infrastructure projects, to name just one example. But as the industry continues to be starved of capital, I see a supply cliff on the horizon.

Mexico remains one of the most important geological locations for high-grade gold and silver ores. And I think, with its 500-year mining history, Fresnillo remains one of the best stocks to capitalise on a new gold cycle. That is why I continue to accumulate the shares when finances allow.

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.

Andrew Mackie has positions in Fresnillo Plc. The Motley Fool UK has recommended Fresnillo Plc. 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

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Nvidia stock is becoming more affordable!

Nvidia stock is up 2,500% over five years, but the chip giant’s share split -- announced during its earnings report…

Read more »

Investing Articles

Are Rolls-Royce shares good for passive income?

Our writer is getting mixed messages about the Rolls-Royce dividend. But whatever happens, he thinks passive income hunters will be…

Read more »

Investing Articles

Could the Rolls-Royce share price end 2024 above £5?

As the Rolls-Royce share price continues its remarkable run, our writer considers where it might be at the end of…

Read more »

Investing Articles

UK stocks are hitting all-time highs! Yet these 2 still look cheap to me

The FTSE 100's on a roll. But it's still possible to pick bargain UK stocks, provided we know where to…

Read more »

Satellite on planet background
Investing Articles

At just under £14, can BAE Systems’ share price still be a prime FTSE 100 bargain? 

Despite its bullish price run, BAE Systems’ share price still looks undervalued to me and appears set for strong growth.

Read more »

Photo of a man going through financial problems
Investing Articles

2 dividend shares I’d avoid like the plague in today’s stock market

The UK stock market is full of high-yield dividend shares that could equate to a steady stream of passive income.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

£17,000 in savings? Here’s how I’d aim to turn that into a £29,548 annual second income!

Generating a sizeable second income can be life-enhancing and can be done from relatively small investments in high-dividend-paying stocks.

Read more »

Investing Articles

With as little as £300 a month invested, this stock could net £16,000 a year in passive income

Putting a few hundred pounds each month into the stock market could eventually generate a five-figure annual passive income, this…

Read more »