The trajectory of the Rolls-Royce (LSE: RR) and Glencore (LSE: GLEN) share prices couldn’t be more different. The aerospace and defence engineer has skyrocketed, up 122% in the last year and an astonishing 1,325% over three. It’s easily the hottest stock on the FTSE 100.
Glencore, by contrast, has been one of the coldest. Shares in the commodity giant are down 25% over 12 months and 35% across three years, with little sign yet of reversing that trend.
Very different FTSE 100 stocks
Rolls-Royce has been propelled by strong demand for civil aerospace, defence contracts and power systems. On 31 July it lifted full-year guidance after reporting a 50% surge in first-half operating profits. No wonder investors continue to pile in.
Glencore’s 14 August update was a stark contrast. Adjusted core earnings fell 14% to $5.4bn, reflecting weaker coal prices and reduced copper volumes. Management called the outcome “solid” given US tariff policy and ongoing Middle East tensions, but it didn’t inspire confidence. The slump in demand for raw materials and China’s slowdown are dragging on.
I hold both shares, and happily the gains on Rolls-Royce more than offset the paper losses on Glencore. CEO Tufan Erginbilgic has transformed Rolls, and there could be more to come. However, it can’t keep flying at this speed forever. At flying has recovered since the pandemic, demand is starting to slow as economies struggle. Mini nuclear reactors offer a potentially massive growth opportunity, but could come to nothing. With a dizzyingly high price-to-earnings ratio of 53, any setbacks will be punished.
Glencore is harder to love. I’m gloomy about the global outlook and worry demand for minerals may remain weak. It’s one of the most disappointing stocks in my Self-Invested Personal Pension, yet I’ve held on. Selling after such a long slump would almost guarantee locking in a loss, and analyst forecasts give me a sliver of hope.
Brokers currently covering the miner have a consensus one-year target price of 369.8p, which implies a 28.5% lift from today’s 287.8p. I’ll believe that when I see it.
Growth stock, recovery play
Rolls-Royce is still attracting support. Analysts reckon the shares could climb another 12% to around 1,214p over the next year. That suggests there’s still fuel in the tank.
Investors might still consider buying but only if they accept that Rolls-Royce is very likely to slow from here. Given today’s larger £90bn market cap. Another 1,325% jump would turn Rolls into a £1.3trn company. That would make make it roughly half the size of the entire UK economy, with GDP at £$2.6trn today!
For Glencore, forecasts look brighter than the headlines suggest. Analysts forecasts produce a consensus one-year price target of 369.8p. If correct, that would be an increase of 28.5% from today. That’s a bullish stance. I don’t feel half as confident myself, given the bumpy global economy and metals prices.
For me, Glencore remains a Hold. I’m not selling. The commodity sector is famously cyclical, and I don’t want to bow out at the bottom. But I can’t muster the excitement to add to my stake today. Brave contrarians may be tempted, but should take a long-term view. If I could only hold one in my SIPP, Rolls-Royce would win hands down.
