Opinions
Cameron Hurst
Glencore
GLEN-LN
WATCH
Apr 11, 2018
Stock price when the opinion was issued
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He is suspect of this company. Had tried to Short it, but was late. It had a massive rally, but is still down from the beginning of the year. He just doesn’t see going in now. They have 2 businesses. One is commodity trading that has very thin margins. They need to have a very good credit rating in order to maintain that. They have a mining business that they bought at the top of the cycle. It is difficult to see how they can maintain their credit rating while the mining cycle turns down and the commodity price falls. Has a large amount of debt.
First, the deal needs board approval, then Ottawa's approval. He doesn't buy commodities. GLEN has a (dirty) thermal coal business and Teck has a coal-for-steel business. Teck feels (and he agrees) that it doesn't make sense to combine these two coal businesses.
Base metal investing, in general, is very cyclical. Very rarely a long-term growth story that you buy and hold because you always want to be there. That applies to base metals and precious metals. They can go through months or even years where they're doing great, and then they'll be out of favour for months or years. When the global economy's slowing, these things cheapen up quite a bit. Already at the low end of the range, though could get cheaper if we hit a recession.
This one's a great company and operator. Right now, particularly good value. He's been buying VALE for his portfolio, but GLEN fits the bill too.
Trades on the Pink Sheets, which can be very expensive. He says 40-42% of the EBITA is exposed to batteries. He has generally been under weighted in materials as the sector has underperformed. He would give this time to watch. He likes the house, just not the neighbourhood.