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Brokers seem quite bullish on the Glencore share price this month: Deutsche Bank reiterated a buy recommendation on 13 October, echoing Citigroup and Jefferies International. Deutsche set 430p as the latest target for the Glencore shares. Macquarie,  which you would expect to know its mining and commodities stocks, rated Glencore as an outperform.

At the time of writing, the Glencore share price was at 377.55, so there looks to be plenty of upside here.

Rio Tinto scandal

This bullishness comes at a time when rival Rio Tinto seems to be embroiled in a potential fraud scandal, with two senior executives charged with inflating the value of coal assets in Mozambique. Former chief executive Tom Albanese and former chief financial officer Guy Elliott are both facing a possible law suit for failing to follow accounting standards regarding the valuation and recording of coal assets.

Glencore, on the other hand, has recently taken control of Chevron petroleum assets in South Africa, in a deal valued at around the billion dollar mark. It is working in conjunction with a black economic empowerment partner. The deal covers a refinery near Cape Town and 820 petrol stations. It was originally going to go to China Petroleum & Chemical Corp, but the South African shareholders exercised a pre-emption right.

Glencore is paying $973 million for a 75% stake in the business.

Bullish Glencore share forecasts

Glencore share forecasts have been getting increasingly bullish about Glencore shares over the summer: back in July Liberum Capital had Glencore shares at hold, at a share price target at 285p.

Rio Tinto stock, on the other hand, seems to be on its way south as a result of the legal issues it faces in the United States. The stock opened at 3701 this morning, but has dropped to 3681.50 at time of writing. Legal issues surrounding a stock will always tend to push it down. Much will depend on the scale of the suit the company is facing. The Deepwater Horizon liabilities BP faced following its Gulf of Mexico oil disaster were massive. The Mozambique valuation issues are serious for the individuals involved, but less likely to harm Rio Tinto’s short term fortunes.

It does, however, set up an interesting pairs trade for those who go long Glencore and short Rio Tinto. It will be less likely to last however.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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