Image source: Getty Images
Not all of them FTSE 100 stock pick can be a winner. I have about 20 green chips and two victims: mining giant Glencore (LSE: GLEN) and pharmaceuticals titan GSK (LSE: GSK).
Their shares are down 8% and 12%, respectively, over 12 months. Personally, I’m sitting on paper losses of 16% and 19%, despite taking a few shares and yes, it hurts.
Although the decline is disappointing, I remain hopeful that I will change. So what are the odds?
Does Glencore pay dividends?
As one of the world’s largest miners and traders, Glencore is highly exposed to volatile prices for key resources such as coal, copper, and zinc.
That was fine when China posted double-digit GDP growth year over year, while receiving 60% of the world’s supply of metals and minerals. Those days are over and with one Beijing stimulus package after another under way, we can’t imagine they will return.
Glencore must also navigate the pivot to renewable energy and a low-carbon future. Its huge coal business remains hugely profitable but is at odds with global decarbonisation goals.
President Donald Trump’s tax hikes are another concern. Glencore’s share price jumped on Friday, along with the commodities sector in general, as Trump has (for now at least) adopted a tougher stance. No doubt there will be more twists to come.
The shares look well-valued trading at 10.5 times earnings while their 2.6% yield could be topped up with a one-time dividend in the spring.
The 15 analysts providing one-year share price forecasts have produced an average target of 493p. If correct, that’s a huge increase of about 30% from today. I would hate to miss it if that happens. In a notoriously cyclical sector, I would be more likely to sell if the stock went down.
Long-term GSK investors could be forgiven for feeling disheartened. The stock is down 18% over the past decade. And even though investors got a lot of dividends during that time, they were hoping for more. Today’s 4.25% trailing yield is solid but still below the 6% or so that investors had been expecting.
GSK shares are down, but not out
Pouring money into R&D instead should have increased the pipeline and share price. It hasn’t really happened yet. Opening a consumer health care business Haleon It didn’t add much light to my mother either.
I thought GSK’s share price would rise again last year as it settled a US class action lawsuit over the heartburn drug Zantac. The relief was short-lived. And with Trump targeting big pharma, investors have other concerns.
GSK shares are cheap, trading at 8.8 times earnings, but there are suspicions of undervaluation here.
The 17 analysts providing one-year share price forecasts have produced an average target of 1,618p. If correct, that’s about a 19% increase from today. Combined with that yield, this would give me a total return of 23%. I don’t see it happening, but I’ll wait if it does.
I could really see Glencore rallying hard from here. I think GSK will last a long, long time. I continue to hold both but really had to buy Nvidia.
Source link
