Glencore (LSE: GLEN) is regularly in the top-ten list of the most traded stocks on the FTSE 100 index, reflecting both the size of the company but also the frequency of trading by short-term speculators and longer-term investors.
It is logical to conclude that a good number of our readers own or have owned Glencore shares over the past year, so it makes sense to review the recent share price performance and look into the bumpy road it has been on.
First, the numbers. If you had invested £1,000 into Glencore a year ago, when it was trading at 297.5p per share, you would currently be seeing a loss of 22.5% when comparing it to the share price of 230.55p at the close last Friday. This would mean your £1,000 is now worth £775.
When we compare this to the overall FTSE 100 index, which returned 11.3% over the same period, it is clear the share has under performed.
Sell in May and go away
As the old investment adage goes, many investors sell shares after strong performance in the first quarter of the year and come back later in the year. For Glencore, this appears to have been true, as the share price performance was healthy from January to April, but started to fall from the end of April onward.
While this drop could be attributed to company-specific issues, it was really driven by broader sentiment in the market. This was at the time when the trade war between the US and China was escalating, along with concerns about the global economy slowing down. Due to the size and truly global nature of Glencore, the stock was hit hard by these concerns.
Into the summer, the share price was hit further following the release of half-year results. Net profit fell from $2.8bn in the previous period to $226m, which was mostly blamed on weak metals prices. It also decided to cut operations in the Democratic Republic of Congo, after various issues there continued to cause headaches. My colleague Karl wrote an interesting piece at the time, here.
This left the share price around 230p, a level at which it now sits around six months later.
A further slump ahead?
Just when the share price was starting to stall toward the end of last year, the FT reported that the Serious Fraud office had opened an investigation into the firm due to suspicions of bribery. This was not a good note to end on, and it continues to hang over performance in the market.
With this investigation ongoing, along with rumors of job cuts, I do not feel buying into Glencore makes sense at the moment. This doesn’t mean that I would steer clear of the industry in general. Take a look at players such as Rio Tinto instead, that have had positive share price performance over the past year.