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My 3 Picks For 2014: Centrica PLC, Ferrexpo Plc and Glencore Xstrata PLC

2013 was one of the best years on record for stock markets around the world. Indeed, the FTSE 100 is now sitting within millimetres of its all-time high. Still, in my opinion there are plenty of shares that look attractive, even in this strong market, and you don’t have to look that hard to find them!

Unloved but essential

My first pick is unloved Centrica (LSE: CNA)  (NASDAQOTH:CPYYY.US). Recent political statements have weighed on the utility sector and Centrica’s share price, like that of its peers has suffered. However, while the outlook for utility companies here in the UK may be cloudy, to outlook is clearer overseas and this is where Centrica is focusing its efforts for growth.

For example, the company has been welcomed with open arms in the US by both customers and regulators. In addition, Centrica is growing within Ireland where it is the preferred bidder for the retail arm of Ireland’s state gas company.

What’s more, Centrica is also pulling the plug on many UK projects, due to increasing amounts of red tape and rising costs. This should allow the company to refocus its efforts on growth overseas, where Centrica can drive profits higher without having to worry about political intervention.  

Iron ore

My second pick is Ferrexpo (LSE: FXPO). Ferrexpo is a low-cost iron ore producer, and the company recently reported that it was mining iron ore for a cost of less than $60 per tonne. With iron ore currently trading at a price of around $130 per tonne on the open market, Ferrexpo’s profit margin exceeds 100% per tonne of ore mined.

Furthermore, the company brought a new mine into production last year and Ferrexpo’s management expect costs to drop further as this new mine reaches peak output. Nevertheless, Ferrexpo did not have a good 2013 and its share price is down nearly 30% since January last year but things look to be brightening up for the company. 

Cash-flow king

My final pick is commodities giant Glencore Xstrata (LSE: GLEN). Unlike the rest of the commodity industry, which has suffered from falling commodity prices, Glencore’s trading and marketing operations have helped cushion a downturn in the company’s traditional mining business.

What’s more, as Glencore remains profitable while peers struggle, the company has been able to use this to its advantage. Indeed, Glencore has been investing in floundering resource companies, picking up quality mining assets at low prices. Glencore is especially active in the oil and gas sector. 

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> Rupert owns shares in Ferrexpo.