In a bull market, shares across the FTSE 100 index benefit. The bigger gainers are likely to be cyclical stocks, which represent those companies whose demand fluctuates depending on how the economy is doing. Mining companies are among these.
But something unique happened last year. The FTSE 100 index languished and the world economy shrank, but mining stocks rallied as the Chinese government went on a public spending drive, raising demand and prices for commodities. This was a positive for mining shares.
Glencore positive on earnings from marketing
One such is the Swiss multi-commodity miner Glencore (LSE: GLEN). Its share price has almost doubled in the last year.
This share price rally is supported by fundamentals. In its production report for the first quarter (Q1) of 2021, the company reported improvement in copper production by 3% from last year, while coal production is down by a whole 23%. Still, despite this mixed to poor result, it has maintained its full-year production guidance, which is a positive.
Glencore is also positive on its earnings from marketing. Besides mining metals, minerals, and energy products, it also markets commodities sourced from third-party suppliers around the world to its customers. It expects the full-year number from this segment to be at the top-half of its long-term guidance of $2.2bn-$3.2bn.
Also, commodity prices still continue to be strong. In Q1, copper prices were up by 51%, while coal prices were up by 25%, which bodes well for it.
There is a downside to Glencore, though. On a net basis, it is loss-making. Its share price in recent years has also been impacted by corruption charges, which can impact its prospects again as attention shifts from the pandemic.
Evraz promises both growth and dividends
Another miner to consider is the Russian metals miner Evraz (LSE: EVR), which is both a growth and an income stock. Its share price has risen by more than two times in the past year.
Its dividend yield too, is a healthy 5.6%. With a price-to-earnings ratio of only around 15.5 times, even with these healthy stock market metrics, I think the share can make some gains.
It has reported a weak production update recently, but it expects to improve production in Q2 and strong prices can help too.
On the flipside, it increased its borrowings last year, as its revenue declined and also cut its dividends. However, Evraz is a financially healthy company, whose net profits more than doubled in 2020, even though its topline declined.
My takeaway for the FTSE 100 stocks
In sum, I think both Glencore and Evraz have positives to work with, despite some of their challenges. The commodity price rally, in particular, can be a stronger driving force for them than anything else, for the foreseeable future.
Between the two of them, Glencore is a growth stock for me that has suffered quite a bit in the recent years and can gain more. Evraz has seen much stock price growth too, but I wonder how much more is in store. I do like it from a dividend perspective, though.
