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Anglo American plc and Glencore plc are up another 30% in a month: can they repeat the trick?

2016 has been an astonishing year for investors, but few stocks have performed quite as astonishingly as Anglo American (LSE: AAL) and Glencore (LSE: GLEN). The two listed mining giants were the worst performers on the entire FTSE 100 last year, losing three-quarters of their value. But this year the tables have dramatically turned.

Tables turn

The stocks have been the pick of the index in 2016. Anglo American, for example, has seen its share price more than triple from 222p on 20 January to around 786p today, while Glencore has bounced from 75p to 185p. They’ve richly rewarded those brave and far-sighted souls who bought at the bottom, few of whom could have predicted the scale of the rebound. Their share prices continue to climb, rising almost 30% in the month to Friday 22 July.

The initial share price surge was partly fuelled by bargain hunters who decided that both stocks had been oversold, but what’s driving their stellar growth today?

Neat and tidy

Anglo American is no longer cheap by conventional metrics and looks pretty fully priced at 15.9 times earnings. At 786p it isn’t that far away from its 52-week high of 856p. Similarly, Glencore’s 185p is close to its year-high of 226p, while it trades at a hefty 43.2 times earnings. 

Both companies look in better shape than last year, as they’ve worked hard to pay off debt, cut spending, dump assets, and smarten up their balance sheets. Brexit will have played a part in their recent recovery: the 10% plunge in the value of the pound will have drawn in foreign investment, especially since both stocks are a play on the global economy rather than the UK’s domestic health.

Copper bottomed

Anglo American and Glencore have also been boosted by fresh hopes of yet another bout of stimulus, as central bankers around the world line up yet another attempt to pump life back into the global economy. Investors have expected this to feed through to higher metals prices, with copper hitting a seven-week high at the end of June, but there’s no guarantee this will continue. Copper prices averaged $4,692 a tonne during H1, but Barclays reckons they’ll fall to about $4,150 in the second half, due to slowing Chinese demand.

Metal prices have also been hit by the rising US dollar, and with uncertainty spreading through the rest of the global economy the greenback could rise higher still. Anglo American has also revised its copper production guidance downwards, which won’t help. The company’s earnings per share (EPS) are forecast to fall 27% this year but there’s better news in the pipeline, with an anticipated 29% rise in 2017.

China on my mind

Next year looks even more promising for Glencore, when EPS are expected to rise a whopping 61%. But even after that spectacular growth, it’s still expected to trade at a pricey 28 times earnings by the end of 2017. There was a great opportunity to buy these stocks in January but today the price isn’t right for me, especially as I expect the China growth story to continue slowing. 

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.