Glencore PLC (LON:GLEN) managed to buck a dull trend for the miners today, edging higher thanks to an upgrade in rating by Deutsche Bank in a mixed review of the sector.
The German bank’s analysts hiked their stance on the FTSE 100-listed firm to ‘buy’ from ‘hold’, while upping their target price to 420p from 300p.
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In late morning trading, Glencore shares were changing hands at 347.5p each, up 0.35p.
In a note to clients, Deutsche’s analysts said: “While there are clear signs of a cyclical slow-down in China, the sector has derated in anticipation of lower commodity prices and we think ongoing capital/ supply discipline and a focus on cash flow over growth can re-rate the majors over the medium term.”
The analysts suggested investors should focus on two themes - cash flow quality and commodity exposure – and said Glencore is one of their two top picks based on its exposure to both copper and zinc, and its latent capacity growth.
They named Rio Tinto PLC (LON:RIO), on which they already have a ‘buy’ stance, as their other top sector pick based on valuation and cash return grounds.
Anglo American downgraded
But Deutsche Bank downgraded its rating for peer Anglo American PLC (LON:AAL) to ‘sell’ from ‘hold’, despite lifting its target price to 1,250p from 1,080p to reflect near term earnings upgrades, following a strong performance by the stock over the past three months.
The bank’s analysts said: “Although cheap on near term multiples, high bulk exposure makes the company vulnerable to lower demand and prices in Q417 and 2018.
“We expect 2017 to be a peak for cash flows, given declining prices and rising capex requirements over the medium term.”
Anglo American shares were down 1.4%, or 19p at 1,314p.