Image source: Getty Images
The FTSE 100 reached a new record high this month, surpassing the previous record set in March. Despite some tariff-induced volatility in April, UK shares have been performing well as businesses adapt to the shifting macroeconomic landscape. And overall, any investor who put money to work at the start of the year with a low-cost index fund has already reaped an impressive 10.7% total return.
That means a £10,000 initial investment is now worth around £11,070. Considering the long-term average return of the FTSE 100 has historically sat at around 8%, 2025 is definitely shaping up to be a good year for investors. Yet even a 10.7% return pales in comparison to what some stock pickers have achieved.
Looking at the winners
FTSE 100 companies like Airtel Africa, BAE Systems, and Rolls-Royce have all reaped substantial double-digit returns since the start of the year, far outpacing their parent index. However, year-to-date, it’s Fresnillo (LSE:FRES) that’s stolen the show after more than doubling.
The leading Mexican gold and silver mining enterprise has been reaping the rewards of rising gold and silver prices as inflation fears and geopolitical tensions rise. And with year-on-year production volumes on the rise, analysts are becoming increasingly bullish, especially since the political uncertainty regarding open pit mining in Mexico has started to wane.
Combined, these factors have sparked fresh investor sentiment towards the business, with institutional analysts like Canaccord Genuity raising their 12-month share price targets. And subsequently, a £10,000 investment at the start of the year is now worth a whopping £20,716. But is it too late to buy?
What’s on the horizon?
Despite the renewed optimism from investors and higher price targets from analysts, the Fresnillo share price might have gotten a bit ahead of itself. Even after lifting expectations, the average consensus price forecast for the mining stock is at 1,049p. That’s around 24% lower than where the shares are now trading.
Is this premium valuation justified? Maybe. Suppose geopolitical tensions continue to rise and inflation makes a comeback? In that case, demand for safe haven commodities like gold and silver is likely to jump, pushing prices higher and enabling Fresnillo’s earnings to surge even if production doesn’t grow.
Unfortunately, the opposite is also a potential reality, as a return to geopolitical stability would have the opposite effect. And while the group’s higher ore grades could offset the impact of commodity price drops, that’s dependent on production ramping up.
Put simply, Fresnillo has next to no control over the price of its products. And at this stage, an investment in the precious metals miner seems to be a bet that commodity prices will continue to rise.
Personally, with the shares now trading ahead of expectations and at a price-to-earnings ratio of almost 100, I think the risk’s too high for my tastes. So I’ll be keeping this business on my watchlist for now.
