When a FTSE 100 growth stock really gets going, it can behave like a rampant penny share. That’s certainly been the case with gold and silver miner Fresnillo (LSE: FRES).
Its shares have surged a staggering 427% over the past year, which would have turned a £10,000 investment into £52,700. Over two years, it’s up 625%.
Precious metals are having a moment. Gold jumped 65% last year to $4,310 an ounce, silver rose 40%. In January, both went mad, with gold surging to a new all-time high of $5,608. Then on Friday (30 January) the price plunged almost $1,000, a drop of close to 20%. Naturally, Fresnillo fell too.
These shares have made investors rich
Gold is the world’s oldest safe haven, and investors have been fretting about everything from US relations with China, Iran, Russia and Venezuela, to a weakening dollar and Donald Trump’s choice of successor to Jerome Powell as chair of the US Federal Reserve in May.
Friday’s sell-off was sparked by news that Trump had played it relatively safe by nominating Kevin Warsh, combined with a growing sense that gold had simply gone too far. Fresnillo shares are down 17.5% over the past week.
Fresnillo investors may now be wondering whether it’s time to bank those profits. Potential buyers will wonder if they’ve been handed a chance to get in at a lower price.
It’s tempting. After that violent sell-off, the metal is already showing signs of recovery. After scraping $4,373 on 2 February, it’s rebounded to $4,934 Tuesday morning.
There’s still plenty to worry about. We can’t say how Kevin Warsh will behave as Fed chair, fears of an artificial intelligence bubble remain, geopolitics are still edgy and central banks continue to hoover up gold.
It surely can’t beat the FTSE 100 again?
Fresnillo is hard to call cheap by conventional measures. Its trailing price-to-earnings ratio is around 137. Yet the forward numbers look more forgiving. Fresnillo is forecast to trade on a P/E of around 32 in full-year 2025, falling to 15 in 2026. So there are good reasons to be tempted.
Gold miners aren’t a pure play on bullion prices. There’s an extra layer of risk in getting the metal out of the ground safely, efficiently and consistently. On 28 January, Fresnillo reported that gold and silver output fell in the year to 31 December, by 33.7% and 13.5%, respectively. That was in line with guidance, but a reminder of the operational risks.
Consensus analyst views produce a one-year share price target of 3,722p, which implies a small retreat of around 3% from today’s level. Expectations are stretched after last year’s extraordinary run.
In the short term, Fresnillo shares could go anywhere. Investors should consider very carefully before buying it today. Yet I can understand that those without any gold exposure might be tempted to take a position. They could feed small, regular sums into the stock, taking advantage of any dips. Personally, I’m going to accept I’ve missed my moment. Then search for this year’s big growth opportunity rather than chase last year’s. I can see plenty to tempt me on the FTSE 100 and FTSE 250 today.
