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Forget gold! These FTSE 100 shares are up by 90% in six months

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Gold investors are feeling good right now. The price of the yellow metal has risen by more than 20% over the last six months, providing some protection from the stock market crash. That’s true. But some FTSE 100 shares have done much better than gold.

The two FTSE 100 companies I’m looking at today have both risen by about 90% over the last six months. Silver and gold miner Fresnillo (LSE: FRES) and online grocery pioneer Ocado Group (LSE: OCDO) have rocketed ahead this year, for a variety of reasons.

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I reckon that one of these stocks remains a decent buy, while the other should probably be avoided.

Half-year profits up 137%

Mexico-based Fresnillo said its pre-tax profit rose by 137% to £127.9m during the first half of the year. Silver production was “relatively unaffected by Covid-19.” Although the group’s smaller gold operation was hit by shutdowns, production is now underway again.

Looking ahead, the company expects silver production of 51m-56m ounces this year, with gold production ranging 785,000-815,000 ounces. Spending will be slightly lower than previously expected and analysts now expect Fresnillo’s after-tax profit to rise by 43% to $295m this year.

The outlook for 2021 is significantly stronger — analysts expect profits to rise by 59% to $470m, as Fresnillo benefits from stronger metal prices and expanded production.

Buy Fresnillo?

If the global economy recovers relatively quickly, Fresnillo could benefit from stronger demand for silver, which is widely used in the electronics industry. The firm should also continue to profit while gold prices stay high.

Fresnillo’s finances look pretty healthy to me, with very little debt and good cash generation. The shares currently trade on around 23 times 2021 forecast earnings, with a dividend yield of 2%. This FTSE 100 share isn’t the bargain it was six months ago, but I still think Fresnillo can deliver value for shareholders from this level.

Ocado: FTSE 100 share for tech lovers?

What about Ocado? The company’s shares have rocketed this year as demand for online food shopping has soared. The firm has also reported a number of new orders for its automated warehousing system from foreign retailers.

So far, so good? Maybe. But my problem with this FTSE 100 share is it now looks very expensive, even by the standards of other tech stocks.

Ocado is expected to report a loss of about £170m in both 2020 and 2021. But its shares are valued at nearly nine times sales. Even Amazon, which is profitable, only trades on five times sales.

Management provide very little detail on the expected profitability of the group’s long-term partnerships with other retailers. So we don’t really know how fee income will grow.

In the meantime, all I can see is that Ocado continues to spend many millions each year building warehouses for other retailers. When will shareholders see some profits in return for this spending? I don’t know.

My view is Ocado’s large warehouse model won’t necessarily be the winning solution for online grocery retail. Supermarkets already have large networks of stores close to their customers. For example, Tesco is experimenting with a small automated distribution warehouse inside an existing store. I reckon this could be a better model for home delivery.

For my money, Ocado looks too expensive and too risky among FTSE 100 shares. I could be wrong, but I’d stay away.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Fresnillo and Tesco and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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