Russian gold and silver digger Polymetal International (LSE: POLY) saw its stock value ascend to six-month peaks above £10.40 late last week, investors piling-in with gusto on the back of spiralling metal values.

Bullion prices breached the $1,250 per ounce landmark late last week as the turbulence surrounding President Trump’s administration continued, this time as attempts to get a replacement for Obamacare through the House of Representatives spectacularly failed.

This put pressure on the US dollar and in turn lent the commodities complex further support. And safe-haven metals like gold and silver could gain further traction in my opinion should Trump struggle to get other legislation, like tax reforms, pushed through in the weeks and months ahead.

Meanwhile, the store-of-value metal investments are likely to gain further traction once the British government triggers Article 50 on Wednesday, firing the starting gun on EU withdrawal and possibly prompting years of massive political and economic uncertainty.

And Polymetal is steadily hiking production to reap the fruits of the current environment. The company dug 1.27m ounces of gold out of the ground in 2016, and plans to hike volumes to 1.4m ounces this year and to 1.55m ounces in 2018.

So it comes as little surprise that the City expects earnings to keep rising at Polymetal at a terrific rate. Indeed, growth of 23% is pencilled-in for 2017, and 11% for next year. These projections result in very-cheap P/E ratios of 11.6 times and 10.4 times respectively.

I reckon Polymetal could prove to be a splendid growth share in the years ahead and is a particularly attractive bet at current prices.

Bubbling over

I also reckon AG Barr (LSE: BAG) could see investors pile back in with gusto, possibly as soon as the firm’s next trading statement (full-year financials are scheduled for Tuesday, March 28).

Due to recent market difficulties at home, the number crunchers expect AG Barr’s recent record of decent earnings growth to grind to a halt with a 2% decline in the year to January 2017. But the beverages behemoth is anticipated to rebound with rises of 4% and 5% in fiscal 2018 and 2019 respectively.

Subsequent P/E ratios of 18.2 times and 17.5 times may be slightly toppy, but I believe the Irn Bru maker’s rising success across the globe merits these premium values.

AG Barr announced in February that “our second half trading performance strengthened,” helped by new product introductions like Rubicon Spring and IRN-BRU XTRA. The manufacturer now expects full-year like-for-like revenues to have risen 1.5% last year.

While trading conditions in the UK remain difficult, I am confident that the company’s drive to reduce the amount of sugar in its drinks in line with changing consumer habits should help to mitigate the worst of these troubles. And looking further down the line, I believe AG Barr’s improving momentum across The Americas should deliver excellent returns.

The post Has the time come for these 2 growth shares to explode? appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended AG Barr. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

European problems

The FTSE 100 may have coped extremely well thus far with Brexit. However, the process has not really begun. The UK is yet to invoke Article 50 of The Lisbon Treaty and once this takes place, it will commence a period of intense uncertainty for the UK and European economies.

Clearly, the FTSE 100 is not UK-focused and so it is more dependent upon the global environment than the local one. However, weakness in the EU has the potential to spread across the globe and cause investor sentiment to come under pressure. And with there being a clear disagreement between the UK and EU on freedom of movement and access to the single market, the negotiations may drag on for over two years.

As such, once the realities of how long-winded, challenging and uncertain Brexit will be come to the fore in 2017, the FTSE 100’s performance could suffer.

Trump

Donald Trump may not have caused a decline in the value of the FTSE 100 yet, but he has the potential to do so next year. His policies may not be the exact same ones as he discussed during the election campaign, however they are likely to cause significant change on both an economic and social level. This could cause uncertainty among investors. Since investors have historically become increasingly risk-averse during periods of intense change, the FTSE 100’s performance could suffer.

Trump’s election victory also presents challenges in terms of global political risk. US relationships with Russia and China in particular could change in future, which could lead to an increasingly risk averse attitude among investors. Therefore, risk-on assets such as shares could fall.

Chinese difficulties

While the world has been focused on Brexit and Trump, it seems to have overlooked China’s falling growth rate. Earlier in the year, concerns about China’s economic performance led to a correction in the FTSE 100’s price level and there is the potential for a repeat of this in 2017.

Although China continues to offer exceptionally high long term growth appeal as it becomes increasingly focused on consumer goods and services, its transition away from a capital expenditure-led economy is unlikely to be frictionless. This could cause severe bouts of concern among investors regarding its long term future. And if trading disagreements with the US exacerbate in 2017, doubts regarding the global growth outlook could begin to surface.

In such a situation, the FTSE 100 may fall. While this will lead to paper losses, it could also provide an excellent buying opportunity for long term investors. As such, 2017 could be a tough year for shares, but a great year for long term investors.

The post 3 reasons why the Footsie is set to slump in 2017 appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

However, with Trump widely seen as an erratic and unpredictable character, it’s unclear which sectors, and in particular which stocks, will genuinely benefit in the long run. With this in mind, I’m taking a look at whether Trump winners BAE Systems (LSE: BA) and Shire (LSE: SHP) can extend their earlier gains.

More defence spending?

Defence stocks, such as BAE Systems have been flying high, and on the surface, it makes a lot of sense. Trump has pledged to strengthen the military, with particular emphasis on traditional military firepower – a larger army, more navy ships, more fighter aircraft and better nuclear and missile defence capabilities. Defence analysts reckon that if he follows through on what he’s promised, his defence initiatives would add more than $50bn to the US defence budget annually.

With the Republicans maintaining control of Congress, you’d think that Trump is in a strong position to deliver on more defence spending. However, things are never as simple as they seem. The Republicans have a smaller majority in the House than in 2014, and Senate Democrats could still filibuster everything.

In addition, Trump is relying on unrealistic cost savings and efficiency improvement to deliver what he’s promised and has many competing pledges, ranging from increasing infrastructure spending to cutting taxes and reducing the national debt – all of which will no doubt compete for funding.

BAE, which derives 36% of its revenues from the US, may also be hit by Trump’s protectionist views. He’s pledged to bring back jobs to America, and would likely favour US contractors over foreign ones.

Despite this, shares in BAE are up 10.2% in just a week, and currently trade at 14 times expected earnings this year. This forward price-to-earnings multiple is below its five-year historical average of 18.1, which indicates shares in BAE still seem undervalued despite recent gains. 

Policy uncertainty

Trump’s election win has been good news for healthcare stocks and one of the top performers in the London market has been Shire, a biotechnology company that focuses on rare diseases. Shire gets nearly all of its revenues from the US, so it’s no surprise that the stock is more sensitive to potential US policy shifts than GlaxoSmithKline or AstraZeneca.

While both candidates were critical of high drug prices, Trump has been less vocal on measures to regulate prices and has been more supportive of deregulation. This could cut development costs and speed up the approval process – and boost profits for the sector. Nevertheless, he hasn’t given any specifics on his health plan yet, and the potential long-term benefit for the sector remains to be seen.

Shares in Shire already gained 9.9% this week, and currently trade at a forward P/E of 11.4. Although this is significantly below its five-year historical average of 20.8, the firm’s recent disappointing haemophilia drug sales figures point towards slowing earnings growth in the near term.

The post Can these Trump winners extend their gains? appeared first on The Twelfth Magpie.

More reading

• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• 1 FTSE stock tipped to handily outdo Rolls-Royce shares by 2027
• Forget SpaceX, here are 3 UK tech stocks to consider buying without the high price tag
• Should investors consider buying BAE Systems shares now they’re back below £20?
• BAE shares are falling: opportunity or warning?

Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In the short run, this trend could continue and the price of gold may come under pressure. Investors seem to have put political risk to one side for the moment and are not all that interested in Trump’s policies on immigration and foreign policy. They are much more focused on his pledge to cut taxes for individuals and businesses while at the same time increasing spending on infrastructure. The end result of this could be increased employment as well as improved economic growth, which is making investors increasingly bullish.

Prior to Trump becoming President, it would be unsurprising for the market to continue to focus on such issues. However, once he assumes office the market’s focus may begin to shift to his wider performance as President. Political risks are hugely relevant for investors and the way Trump behaves on the world stage could have a direct impact on US economic performance.

For example, a tough stance on China could lead to both countries pursuing increasingly protectionist policies, which could hurt the long-term outlook for the global economy. Similarly, a changing relationship with Russia may cause investors to become increasingly nervous regarding the prospects for the macroeconomic outlook.

A hedge against uncertainty

Therefore, over the medium term gold has significant appeal. Its status as a store of wealth and a defensive asset remains intact. And with Trump likely to pursue major policy change as soon as he takes office, uncertainty is set to be high in 2017. This could cause an increase in demand for gold in the coming months, with rapid price rises in the precious metal relatively likely if Trump’s policies lead to higher inflation in the US.

As such, gold remains a sound investment for the long term. It may prove volatile in the short run, and could continue to disappoint somewhat in the coming weeks as investors focus on Trump-the-businessman rather than Trump-the-politician. However, gold has the potential to provide a hedge against volatility and uncertainty, which could prove to be the key themes of 2017.

One way of potentially benefitting from a rising gold price is to buy shares in gold miners. Their performance is closely tied to the price of gold. The industry as a whole has reduced costs and become increasingly efficient in recent years and with valuations being relatively low, there are wide margins of safety on offer.

The post Should you buy or sell gold after Trump’s victory? appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?