Image source: Getty Images
I hope to have cash to invest in my stocks and shares ISA later this month. Below are a couple of smart investments I've added to my list of potential purchases.
The action
Shipping agent Clarkson (LSE:CKN) had a miserable August as panicked investors headed for the exits. It fell by double-digit percentages after a lukewarm reception earlier in the month on its half-year financial results.
Could the sell-off be a sign of a market overreaction? I think so. Both revenue and underlying pre-tax profit fell 3% in the six months to June. However, this needs to be looked at in the context of ultra-strong prior-year comparisons.
It is encouraging that Clarkson has kept its full-year guidance unchanged.
One of the main things I like about the FTSE 250 Index The company has an ultra-progressive dividend policy. It has increased shareholder payouts for 21 consecutive years.
And thanks to its strong cash generation, it increased its interim dividend again – by 7% – despite the aforementioned drop in profits.
Investing in cyclical companies like this can be a bumpy ride at times. As a provider of ship finance, logistics services and maritime research, earnings can suffer during economic downturns.
However, from a long-term perspective, I believe that the future is very promising. Demand for maritime transport will increase steadily in line with the growth of international trade. Around four-fifths of goods are transported by sea.
And with its strong brand and presence on six continents, Clarkson is well positioned to win plenty of business in the future.
The ETF
Commodity price volatility is the only common risk that mining companies must deal with. Problems in the exploration, project development and production phases can be common and can significantly reduce profits.
Investors can reduce, but not eliminate, this risk by purchasing an ETF that incorporates a variety of different mining companies. One such fund I have my eye on today is the Global X Copper Mining ETF (NYSEMKT:COPX).
The fund invests in specialist copper miners alongside more diversified operators. The list of 40 companies includes leading producers such as First Quantum Minerals, BHP, Glencore and Antofagasta.
But why buy the ETF now? With copper prices falling sharply in recent months, so has the value of the fund. It now trades at a historically low price-to-earnings ratio of 13.6 times.
I think this could represent an attractive dip buying opportunity for long-term investors like myself. Copper demand is poised for strong growth thanks to the growing green economy and continued urbanization.
In fact, Bloomberg analysts believe that demand will increase 43 million metric tons by 2050, compared to 26 million in 2022.
This Global X fund has generated an attractive average annual return of 19% over the past five years. I think it could be a great way to capture strong returns from the copper boom.