If I’d invested £1,000 in Glencore shares a year ago, here’s how much I’d have now

Glencore (LSE:GLEN) Shares were most bought and sold, in value, by Hargreaves Lansdowne investors last week.

Trading and mining stocks accounted for 6.06% of the value of shares bought and 7.68% of the value of shares sold. This does not mean that more shares are sold than bought, as the figure is a proportion of the total share transactions on the platform.

In fact, Glencore’s share price soared last week.

So let’s take a closer look at the stock, and explore what’s driving the stock price, and where it’s headed next.

A strong year

If I had invested £1,000 in Glencore a year ago, today I would have £1,340, plus about £40 in dividends. This is a very good result, about 38% in total.

Stocks have defied concerns about a weakening global economy and, after falling in late summer, rallied in the fall.

The surge also comes despite the company cutting production of some industrial and precious metals in the first nine months of 2022.

What drives trading activity?

There are two main considerations for investing in the mining and resources sector, in my opinion.

First, I am concerned about short-term weakness in the global economy. It is not certain that the demand for resources will decrease in 2023, but there is some uncertainty.

Essentially, analysts expect weakness in European and US growth throughout the year. But this can be offset by the reopening of China. Metal is the key recipient of the country’s reopening.

This is reflected in the share price. Glencore trades at a price-to-earnings (P/E) ratio of 5.76 times. That is also below FTSE 100 the average is around 13.5 times.

Sometimes, stocks are cheap for a reason. And, in this case, the reason is uncertain.

Long-term prospects

The second consideration is the long-term outlook. I think we are entering an era of increased competition for resources and, in turn, this will drive prices up.

In fact, various analysts support this. And resource prices are expected to be higher in the next 10 years than in previous decades.

Demand for metals like copper and iron ore could rise amid rapid urbanization and the green energy revolution. This will be compounded by the infrastructure boom we are seeing in emerging economies such as Indonesia.

Glencore’s main products include copper, cobalt, zinc, nickel and ferroalloys. Steel – ferroalloy – and copper are integral to the infrastructure and electrification agenda. Meanwhile, nickel and cobalt are important components of electric vehicles (EVs).

In fact, on average, EVs require more than twice the amount of copper as combustion engine vehicles. And while the latter does not require nickel or cobalt, the EV needs 39.9kg and 13.3kg per car.

So the long-term outlook looks positive, but it’s the near-term uncertainty that causes problems. So, I haven’t bought it yet. I am waiting for a better entry point, although this may be in 2023.