Amid the commodity bust, there is hope for mining companies with strong enough balance sheets to buy attractive assets from weaker competitors.
Here’s an example showing the rebound potential for mining stocks: The 29% decline in shares of Glencore on Sept. 28 left a lot of investors trembling, which was understandable, because it appeared the mining and commodities giant might be overwhelmed by debt payments.
But look at this chart for Gencore PLC GLEN, -1.16% .That’s a merry little rally, with the shares climbing 81% since Sept. 28 through Wednesday’s close.
“In the case of Glencore, fears of a commodity-market collapse due to a perceived risk of the company’s trading business drove mining-share prices sharply lower (even while commodity prices barely moved),” Jefferies analyst Christopher LaFemina said in a report. “These fears have clearly subsided as Glencore is in the process of taking aggressive actions to strengthen its balance sheet, and mining-equity multiples have recovered as a result.”