The FTSE 100 is up by around 2% so far this year. But some companies in the big-cap index have done much better. Today, I’m taking a look at top FTSE 100 risers so far in 2021, each of which is up by nearly 20%.
Which one of these stocks, if any, should I buy today?
The future of mining?
Mining group Glencore (LSE: GLEN) is the FTSE 100’s top riser so far this year, with a gain of 19% since the market closed on New Year’s Eve.
Miners aren’t generally seen as environmentally-friendly businesses. But the reality is that the switch to green energy will require a lot more copper to be dug out of the ground. Battery materials, such as cobalt and nickel, will also be in high demand.
Glencore has regained investor confidence by pledging to phase out coal production and focus on these “transition metals”. The group has also committed to cut its emissions by 40% by 2035, targeting net zero by 2050.
The recent surge in Glencore shares has left the stock trading on 12 times 2021 forecast earnings, with a dividend yield of 3.9%. That doesn’t seem overly expensive, but I’m aware key commodity prices are at multi-year highs at the moment. If prices weaken, Glencore’s profits could be lower than expected this year. Right now, I’d hold onto Glencore shares, but I wouldn’t buy them.
The FTSE 100 riser I’d buy
Next on the list of top risers is oil and gas group BP (LSE: BP), up 18% in 2021. New boss Bernard Looney is keen for the group to be seen as an “integrated energy company,” as it begins a series of changes aimed at cutting emissions and increasing its role in the low-carbon electricity markets.
The oil sector suffered badly last year when prices crashed. Despite recent gains, BP shares are still 40% below the level seen at the start of 2020. As I explained recently, I think that’s probably too cheap.
I expect a strong recovery in energy demand over the next 12 months and believe BP should benefit. In the meantime, the 5% dividend yield means I’ll get paid to hold the shares. I’d buy BP if I didn’t already own enough oil stocks.
Tech superstar?
Industrial software group Aveva (LSE: AVV) is up 17% so far this year. The firm’s shares have now risen by 135% in three years. This strong growth has left the stock trading on 48 times 2021 forecast earnings.
I’ve always found Aveva’s valuation a little hard to understand. I believe it’s a good business with a strong market share in its niche, producing software to help manage complex engineering projects and industrial processes.
However, the stock’s valuation seems to be above historic average levels. Even though 2021 and 2022 forecast earnings are expected to be lower than 2020 earnings. I’m also concerned by the group’s inconsistent profit margins. Aveva is also currently dealing with a large ($5bn) acquisition. This will need to be integrated successfully.
I’d like to own shares of Aveva but, out of all the FTSE 100 risers I’ve considered today, this is is by far the most expensive. It’s too rich for me. For now, I’m staying away.