Glencore (LSE:GLEN), one of the world’s largest mining companies and commodities traders, was the top contributor to performance for the fiscal period and the most recent quarter. Last year, concerns about weaker-than-expected demand for copper and other industrial metals in China drove down the price of the commodity and, along with it, Glencore’s share price. Investors also doubted the company’s ability to service its debt. However, we believed that the market was overreacting, and we used the opportunity to buy shares at what we found to be attractive prices. In the interim, Glencore’s management responded to the weakening share price by announcing an aggressive plan to reduce debt and capital expenditures as well as to sell non-core assets. In 2016, investors have reacted positively to the company’s progress in deleveraging its balance sheet and the sale of its non-core assets, as well as to price increases in three of Glencore’s four core commodities: zinc, coal and nickel. Our investment thesis for this company is intact, as we believe Glencore’s management team is working to enhance shareholder value.
From David Herro (Trades, Portfolio)'s Oakmark International Fund third quarter 2016 commentary.
