Investing in individual stocks can be rewarding but also incredibly frustrating sometimes, and so it has proved to be with Glencore (LSE: GLEN) shares. Despite the recent uptick in the stock, it’s still trading over 40% lower than a few years ago.
Conviction
In the nearly six years since I bought my first stock, I’ve learnt that the most important personal attribute for any private investor is conviction.
Every time we hit the buy button on a stock, we’re making a kind of bet. It’s one based on careful analysis, of course. But no one has a crystal ball. As a long-term investor, my bets are based long in the future, sometimes 10 years or more. To me, investing isn’t about being right today, but at some point in the future.
The only reason I’ll sell out of a stock is if something happens that fundamentally alters my original investment thesis. Suffice to say that hasn’t happened with Glencore.
Tariffs
Today, the vast majority of Glencore’s revenues come from coal. But over the next decade, the miner intends to transition its portfolio away from coal to copper. I view the red metal as the ‘new gold’.
Recently, copper prices hit an all-time high after the US administration announced plans to implement a 50% tariff on it.
When tariffs were first announced back in April, the spread between copper prices on the London Metal Exchange and the New York COMEX widened considerably. Following this new announcement the spread widened even further.
Glencore is well positioned to profit from such market dislocation through its one-of-a-kind marketing business, which trades commodities across the globe.
The electrification metal
Copper demand is set to surge over the coming decade, driven by trends such as heat pumps, EVs and AI. Huge swathes of US rural land is being acquired by the hyperscalers to build power-hungry data centres to support the mass adoption of generative AI technologies.
As demand for electricity goes parabolic, ageing grids will need to be modernised. But a number of challenges are emerging. These include difficulties securing planning permission for the installation of intrusive pylons. Another is securing investment in a market where cheap debt is a thing of the past. For example, last year National Grid issued a £7bn rights issue primarily to invest in energy infrastructure.
My fear is that we are heading for a world of electricity shortages and blackouts. This could be the kind of black swan event that would force governments to ramp up investment in electricity grids.
By 2030, Glencore is expecting to produce 2m tonnes of copper, annually. That’s double today’s output.
Coal
Returning to coal, which remains hugely important for the miner’s profitability today, depressed prices were the primary reason for it making a loss in 2024. Unlike other miners that sold out of their coal assets, it’s betting that demand will remain robust over the next 10 years. Should that prove to be wrong, then it will continue to struggle with profitability.
Over the long arc of time, the only factor that drives a stock price higher is improving underlying fundamentals. The business continues to buy back its own stock at record levels, and insiders have been buying. I joined them too, buying more of its cheap shares this month.
