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Market volatility is not always a bad thing. It can present opportunities for cheap shopping FTSE 100 stocks with the aim of eventually recovering.
One stock that was falling recently also caught my attention Glencore (LSE: GLEN).
Let's dig deeper and see if there is an opportunity for me to buy shares.
Turning down
I understand that mining and commodities is a highly cyclical sector. However, it can be very profitable, especially for large players, and Glencore falls into that bracket.
Still, stocks have been falling for quite some time now. In the 12-month period, shares have fallen 13% from 434p at this point last year, to current levels of 374p. Looking further back, over a two-year period, they are down 23% from 492p to current levels.
The main reason for the recent decline has been the turbulence and high volatility. A few key ingredients for this have been fears of a recession in the US, and economic and political problems in China.
As the world's largest powers that help control the global economy, these countries are struggling with problems that can have a major impact on markets, businesses, and entire sectors. Products is one such sector.
Glencore could continue to have mixed fortunes when it comes to investor sentiment here. Demand for goods in China and other key markets may slow during these volatile times as infrastructure projects are often prioritized. I will be watching these risks closely moving forward.
My investment case
Despite the obvious challenges, Glencore reported a mixed set of first-half results recently. There have been some positives, and a few negatives.
What is important to me is that revenue was up 9% to $117.1bn compared to the same period last year. In addition, the company was able to reduce £1.3bn of debt on its balance sheet, and cash flow generation rose above the $6bn mark.
On a negative note, Glencore posted a loss of $233m, down from a $4.6bn profit the previous year. In addition, profit levels have fallen by more than 30%.
So what's all this faltering, trading, and speculating about Glencore shares? They now trade at an attractive price-to-earnings ratio of just over 10. It's not the cheapest, but it's definitely cheaper than in recent years, which gives investors like me an attractive entry point.
My decision
From a future perspective, there's no denying Glencore's massive presence, and the real-world applications of its assets, could send the company's earnings and shares to new heights. The green revolution, infrastructure development in the US and China, and increasing adoption of electric vehicles (EVs) are just a few examples of how Glencore can make money.
However, I am a little worried about Glencore's dire situation, and the recent performance review has put me off. I think there is better value elsewhere, and I will keep a close eye on the shares rather than buy any right now.
There may be investors with a stronger stomach than me, who can withstand volatility and ups and downs. However, I would like a smooth ride and will look for value stocks elsewhere in the rest of the FTSE index.
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