Can May's losers Anglo American plc (-21%), Tullow Oil plc (-18%) and Randgold Resources plc (-14%) bounce back?
Rising fears that many major raw materials have been overbought weighed heavily across the commodities segment in May.
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Diversified mining giant Anglo American(LSE: AAL) emerged as one of last month's major stock marker losers as a result, the company conceding more than a fifth of its value.
And despite Brent crude rising back above the $50 per barrel marker for the first time since November, energy leviathan Tullow Oil(LSE: TLW) saw its share value tumble in May as fears over lasting supply/demand balances weighed.
Not even gold producer Randgold Resources(LSE: RRS) was immune to the heightened selling activity, the company also nursing a heavy double-digit percentage dip in its stock price.
Steel struggles
This comes as little surprise, in my opinion, as frenzied speculative buying activity, rather than signs of improving market conditions, propelled commodity prices higher, and with it the stock values of the Footsie's major drillers and diggers.
Market realisation of this fact has dragged iron ore values steadily lower in recent weeks, for example. Indeed, the steelmaking ingredient slid to $49.60 per tonne just today, its cheapest since February.
On top of fears of rising supply, as the likes of BHP Billion, Rio Tinto and Vale all bring their next generation of mega-projects online, concerns over future Chinese off-take is also hampering metal values. Manufacturing PMI numbers from the country remained stagnant month-on-month in May, circulating around the expansionary/contractionary benchmark of 50, data showed today.
Markets in the mire
Concerns of enduring oversupply in Anglo American's other major markets like copper and coal is also weighing heavily, naturally. And of course stuttering stimulus measures from the People's Bank of China could also have a devastating effect on Tullow Oil's top line looking ahead.
Allied to this, the world's oil producers are eagerly awaiting news of an output reduction from fossil fuel cartel OPEC, a group responsible for 40% of global output. I believe another refusal to turn down the pumps at this week's meeting could result in further share price weakness for Tullow Oil and its peers.
While the gold price isn't affected by supply and demand indicators to the same extent, this doesn't make Randgold Resources immune to fresh share price weakness. Indeed, the South African digger still faces the prospect of a recovering US dollar in the months ahead, particularly should expectations of fresh Federal Reserve rate hikes transpire.
Far too expensive!
And despite last month's pronounced share price weakness, I reckon all three stocks remain too expensive relative to their earnings prospects, not to mention high risk profiles.
Anglo American still deals on a massive P/E rating of 21.6 times for 2016, while Tullow Oil deals on an even-loftier reading of 76 times. Meanwhile, Randgold Resources changes hands on an earnings multiple of 29.6 times.
I reckon there's plenty of room for all three stocks to keep on sinking.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
