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He glencore (LSE:GLEN) share prices have soared in recent days as market sentiment has risen. In fact, the FTSE 100 is the most widely bought UK stock among investors using Hargreaves Lansdowninvestment platform.
Glencore shares accounted for 2.22% of all buy orders in the week to January 13. That puts it second on the list after the only US electric carmaker. tesla.
Should I add the mining giant to my own stock portfolio today? Or would it be better to invest in other UK and US stocks?
full value
One thing that strikes me is that Glencore’s share price still looks exceptionally cheap right now. At 558 pence per share, it is trading with a forward price-earnings (P/E) ratio of 5.8 times. This is well below the FTSE 100 average of around 13.5 times.
The company also boasts a whopping 9.7% dividend yield for 2023, well above the 3.7% average for shares in the FTSE Index.
Cheap for a reason?
Some stocks are cheap for a good reason, of course. And critics would argue that Glencore’s low valuation of shares represents its uncertain outlook as the global economy falters.
Ole Hansen, director of commodity strategy at Saxo Bank, says commodity markets are facing “a challenging first trimester”. He cites the uncertainty about “China’s disorderly exit from its longstanding Covid-zero policy and what the recovery will look like” as the main cause for concern.
But Hansen adds that inflationary pressures, central bank rate hikes and the ongoing war in Ukraine could also hurt commodity prices. There’s a good chance (at least in my opinion) that these issues will linger well into 2023 as well.
Get ready for the supercycle
Having said that, I think these risks could be reflected in Glencore’s current share price. And as a long-term investor, I think now is a good time to buy the mining giant.
You will see that the world appears to be on the brink of a new commodity super cycle that could boost investor returns. Demand for metals like copper and iron ore should skyrocket on issues like rapid urbanization and the green energy revolution. And prices should be further supported by the massive underinvestment in supply over the past decade.
economists in DT Asset Management comments that “we are in the early stages of a period that should see higher commodity prices and yields” and that current prices do not seem so expensive when adjusted for inflation.
There is also the possibility that commodity markets will significantly beat expectations in the near term as well. Analysts in Goldman Sachs For example, think that commodities will be the best performing asset class this year. They predict that commodity values will rise 43% in 2023.
The verdict
I think Glencore stock could also be a particularly great way for investors to take advantage of any supercycle. Its broad product portfolio means it has exposure to many fast-growing commodity sectors.
This broad span also helps reduce risk, as does its position as a trader and producer of commodities. With money to spare, I will look to add the mining giant to my own portfolio in 2023.
