September 29, 2022

Glencore - Human Rights <-> Good Value?


Glencore - Human Rights <-> Good Value?

In Switzerland, a vote was recently held on the responsibility of large companies. Obermatt CEO Dr. Hermann J. Stern was a strong advocate and also provided extensive financial support for the initiative. Stern is convinced that responsible corporate governance is a key success factor (disclosure: Dr Stern wrote his doctoral thesis on the subject of economics and philosophy - Thesis in German).

Swiss business was against the initiative, which is hard to understand. Is it not precisely clean business management that is so often cited as Switzerland's competitive advantage?

Be that as it may, the bone of contention was the Glencore company, which is on the Obermatt top 10 list of the Investment Theme Silver on 29 September 2022. Obermatt, even as a proponent of corporate responsibility, has nothing against Glencore and we think the stock would be a good buy now.

PRO: The following three points speak for a buy:

  1. Glencore is active in commodities, an area that is gaining importance, especially for electric mobility, which will replace oil with other commodities.
  2. The company is cheaper than 90% of its peers with a Value Rank of 90. Growth is also good with a Rank of 80, better than 80% of its peers.
  3. Glencore has recognised the signs of the times and is focusing on recycling, especially for copper and other precious metals.

CONTRA: The following three points argue against it:

  1. Glencore pays a high dividend of 7.3%, which is also an indication that the company may be at the end of a growth cycle.
  2. Controversies surrounding Glencore are numerous and, even though Switzerland has spoken out against corporate responsibility, there are plenty of other jurisdictions that will come knocking on Glencore's door.
  3. While Glencore has a lot of cash, which is also needed for dividends, it also has large debts, which could become a problem if interest rates rise.

Do the PRO or the CONTRA points win? That is probably difficult to decide and also depends on personal values. We buy the stock for the Obermatt Wikifolio.



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