Investor sentiment is a crucial factor in share price performance and it’s something that could help propel this trio higher, despite Brexit-linked investor nervousness.
Commodities confidence
Since the start of the year, shares in Lonmin (LSE: LMI) have soared by a whopping 184%. A key reason for this has been improving investor sentiment that has resulted from a brighter outlook for the wider commodities sector. Although commodity prices are still under pressure, they’ve stabilised somewhat and this has caused investors to become more bullish about the prospects for Lonmin and its peers.
However, Lonmin has also performed well because of internal as well as external factors. For example, it has successfully raised funds to conduct a major restructuring that has seen costs cut, efficiencies made and a leaner and potentially more profitable company created. Although Lonmin is expected to remain in the red in the current year, it’ s due to move into profitability next year and this could cause investor sentiment to improve. The end result of this may be a higher share price.
Of course, Lonmin remains a relatively high-risk stock and commodity price falls could easily swing its share price the other way. However, the overall risk/reward ratio remains bright and for less risk-averse investors, Lonmin continues to hold significant long-term appeal.
Long road ahead
Improving investor sentiment towards the commodity market has also improved the share price performance of fellow resources company Sirius Minerals (LSE: SXX). Although it’s still some years away from being a producer, Sirius Minerals’ share price is nevertheless closely tied to the performance of the wider mining sector since it needs major financing to get its project off the ground.
Even the first phase of the proposed potash mine in York will cost upwards of £1bn and with investors being nervous throughout much of the early part of 2016, the prospects for raising the required funds seemed less certain. However, rising commodity prices have helped to push Sirius Minerals’ share price 49% higher since the start of the year and this trend could continue if the company is able to deliver positive news regarding its planned development.
Clearly, Sirius Minerals remains a high-risk play and with the mining sector being so cheap there are other highly profitable bargain stocks on offer. But for less risk-averse investors with a very long-term view, it could be worth a closer look.
Upbeat outlook
Meanwhile, shares in James Fisher (LSE: FSJ) have also benefitted from improved investor sentiment this year. The engineering solutions provider has recorded a rise in its valuation of 19% year-to-date and this trend could continue as investors may be attracted to the upbeat growth outlook of the business.
For example, in the current year James Fisher is expected to record a rise in its earnings of 7%, followed by further growth of 12% next year. This would be a major improvement on the 8% fall in earnings that was recorded last year and could help to boost the market’s view of the company. And with its shares trading on a price-to-earnings growth (PEG) ratio of just 1.4, they seem to offer a wide margin of safety as well as a favourable risk/reward ratio for the long term.