The Glencore (LSE: GLEN) share price has had a poor run, and the dividends haven’t been much either. That’s bad news for my Self-Invested Personal Pension (SIPP), because I added the stock in the summer of 2023.
The FTSE 100 commodity miner and trader wasn’t doing particularly well then, so I hoped I was picking up a bargain buy with recovery potential. Alas, no. Unfortunately, the shares kept sliding, leaving me nursing a 25% loss while earning less dividend income than I’d hoped too.
I’m not the only one suffering. Glencore stock’s down 17% over the last year, and 33% over three years. I’ve even been tempted to sell in gloomy moments, but one thing stopped me. Sod’s law. The moment I banked my loss, Glencore would fly. Always happens. Oh, and there’s another reason…
FTSE 100 recover play
Commodity stocks are famously cyclical. Producers ramp up output when prices are high, creating oversupply that pushes prices down, and along with them, profits and share prices.
Demand also follows the business cycle. Natural resources boom in good times and slump during recessions. China’s voracious appetite for metals and minerls propped up the sector for decades, but its growth has stalled despite repeated stimulus from Beijing. Add a slowing US economy and ongoing trade tensions, and Glencore’s feeling the squeeze. A strong US dollar has made metals more expensive globally, hitting demand, while inflation remains sticky. If interest rates fall, the sector should get a boost.
Mixed results
Glencore’s first-half results on 6 August did little to reverse the trend. Half-year adjusted core earnings fell 14% to $5.4bn, and marketing operating profits slid 8% to $1.8bn. Falling coal prices were the main drag, while copper production also declined. A rare positive was that cobalt output, crucial for electric car batteries, jumped 19% to 18,900 tonnes.
The board’s looking to steady things by making $1bn in cost savings and to be fair Glencore shares have climbed 33% over the past six months.
Longer-term investors will wonder what I’m moaning about. They’ve doubled their money, with the stock up just over 100% over five years. Dividends will be on top. This shows how returns come in cycles.
Brokers stay cautious
I’m not the only one who’s wary. On 8 October, Berenberg downgraded Glencore from Buy to Hold, keeping its price target at 350p over concerns about copper production. That’s just a squeak above today’s 341p.
Other brokers are more positive, as consensus forecasts produce a median target of just over 392p, up 15% from today. The forecast yield of 2.2% would come on top.
To my surprise, 11 out of 19 analysts name Glencore a Strong Buy, with two more saying Buy. None say Sell. So they believe Glencore’s flashing ‘Buy, Buy’. I’m less convinced.
Patience required
Investors might consider buying if they’re happy to sit tight and wait for the cycle to swing back. For now, I’m holding and hoping that one day, things pick up. But when I look at the FTSE 100, I can say see loads of stocks screaming ‘buy me’ right now. Glencore just isn’t one of them. I’ll turn my attention elsewhere.
