My Glencore (LSE: GLEN) shares are pants. No, I’ll rephrase that. They’re absolute pants.
The mining giant has fallen 44% over the last 12 months, making it the worst-performing stock on the entire FTSE 100 in that time. That’s blown a big hole in my self-invested personal pension (SIPP), and my confidence as a stock-picker. Even the dividends haven’t softened the blow.
Commodity stocks like Glencore have been hit by slowing demand from China, which once sucked up more than half the world’s raw materials. Its economy is nurturing a huge hangover from decades of debt-fuelled infrastructure building. And there’s no major recovery in sight.
Production steady, payout solid
Add in the prospect of a US recession and ongoing nervousness about global trade, and it’s hard to see where demand will come from next. Glencore operates in a highly cyclical sector, so I’ve got no plans to sell at the bottom. But I’ve been looking for reasons to hold what I’ve got. I can’t see many.
2024 results published on 19 February didn’t do it for me, despite CEO Gary Nagle’s claims that it was a “strong year”. Adjusted EBITDA earnings fell 16% to $14.4bn, hit by lower average energy coal prices.
Net debt more than doubled from $4.9bn to $11.2bn. At least Nagle announced a top-uop share buyback of $1bn, to be completed by August. That’s slim consolation though.
Broker views mixed
Yet others are more optimistic. The 16 analysts offering a one-year share price forecasts have produced a median target of 381p. If correct that would imply a bumper 41% gain from today’s 269p.
Add the forecast yield of 3.09%, and that could mean a total return of around 45%. Which would turn £10,000 into £14,500. It sounds good, even though it would barely get me back to square one.
Of course, many of those forecasts will be out of date. On 1 May, Berenberg revised its target price down from 400p to 380p. It cited a disappointing start to 2025, with copper and zinc production hit by mine sequencing, weaker grades and bad weather. Even Glencore’s prized marketing arm is now expected to deliver only mid-range earnings.
The broker also cut its earnings-per-share forecast for 2025 by. That’s not encouraging. But it still maintained its Buy rating. That’s not one I’d issue right now.
Nothing in the price
When shares rise, it’s easy to imagine them rising forever. When they fall, it’s hard to picture a recovery. I certainly can’t see one happening rigiht now, but perhaps I’m being too gloomy.
Recoveries don’t wait for permission, especially in this sector. They tend to arrive unannounced. The only way to benefit is by owning the shares when nobody else wants them, and hoping things will change.
I can’t bring myself to average down today. Instead, I’m digging in. I suspect that Glencore shares are set to remain pants for a while longer, but others think differently. Let’s hope they’re right and I’m wrong. Again. I’d happily take a second hit to my stockpicking confidence, if only my Glencore shares would climb.
