FTSE 100 powerhouse
Glencore is the world’s largest commodities trading firm. It has a vested interest in precious metals, oil, and gas. Glencore has mining interests around the world in several resource rich nations. These include Canada, Australia, Norway, and the Democratic Republic of Congo.
The demand for such commodities has exploded recently. As the world economy continues its rebuild after the pandemic, I believe demand for these commodities will continue to rise.
Glencore’s initial public offering (IPO) was the biggest new listing the FTSE 100 had seen until it was recently surpassed by the Wise direct listing. As I write, shares are trading for 329p per share. At the same time last year, I could buy shares for 182p, which means its share price has increased approximately 80% in 12 months. In 2021 to date, the share price has increased over 40% from 233p per share to current levels.
Unique position in a competitive and volatile market
Commodities is a very volatile market. Prices can fluctuate massively due to economic, social, and political events across the world. Glencore has a unique position in the market as it trades commodities and mines them too.
Due to Glencore’s size and reach it has been able to perform consistently well for a number of years and continue to grow to a highly regarded position in a heavily regulated and saturated industry. Bigger firms like Glencore have the spending power that gives it an advantage to get ahead in this competitive market.
Glencore has been able to use this spending power to complete acquisitions on a regular basis over the years to increase its presence and offering. I particularly like FTSE 100 firms that grow through acquisitions and organic growth. It shows ambition and an eye on the long term.
Glencore’s past performance is consistent too. Between 2017 and 2019, it recorded revenues of over £200bn. In 2020 this dropped down to £140bn due the Covid-19 pandemic. In addition, it has a high cash flow that supplements a robust balance sheet. I am aware that past performance is not a guarantee of future performance. I personally look at a firm’s track record to help me gauge investment viability.
Risk and verdict
As I mentioned, the commodities market is volatile. The best example of this in recent times is the pandemic. This can affect prices of commodities and eventually financials and the bottom line of Glencore.
Next, commodities firms do not have the best record when it comes to the environment. Environmental issues and scandals can have a negative effect on share price and investment viability. This is especially the case in recent times as there is a growing focus on ethical and environmental investing. Finally, competition is rife in the commodities market which is always something to consider, even for a firm as big as Glencore.
Overall I would happily invest £1,000 in Glencore shares if I were to pick one FTSE 100 stock for my portfolio. It really is the biggest fish in the pond in my eyes and has a track record of success. With the recent hike in demand for commodities, I can only see it becoming a more attractive investment as time goes by.
Jabran Khan has no position in any of the shares mentioned. 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.