Holding the best-performing FTSE 100 stock in any calendar year is going to significantly boost a portfolio’s return, assuming it’s a decent-sized position. Last year it was nip and tuck as International Consolidated Airlines ended up pipping Rolls-Royce and NatWest.
This year, however, it’s not even close. With more than three months of 2025 still remaining, I think we can safely give the gold medal to Fresnillo (LSE:FRES). Shares of the precious metals miner are up a mind-boggling 266% year to date!
That’s double second-placed Babcock International (up a measly 132%). Taking bronze is gold producer Endeavour Mining (102%). None of these figures include dividends.
Fresnillo operates gold and silver mines in Mexico, which largely explains the stock’s outperformance. The price of gold is up nearly 11% in the past month and a whopping 43.5% over 12 months.
Indeed, gold hit a record high of $3,697 per ounce today (16 September), as traders bet that the Federal Reserve will cut interest rates when it meets this week. As a non-yielding asset, the yellow metal generally performs well in a lower-interest-rate environment.
Silver is also on the charge though, rising nearly 40% over the past year. Recently, the price broke through the key psychological barrier of $40 per ounce (it’s currently just under $43).
Fresnillo is the world’s largest silver producer.
Eye-popping profits
In H1, we saw the financial benefit of all this. Fresnillo’s revenue rose 30.1% to $1.94bn, while net profit skyrocketed nearly 300% to $467.6m.
Free cash flow hit $1bn and 2025’s total dividend is expected to be 176% higher.
While Fresnillo is minting cash right now due to higher gold and silver prices, it’s also benefitted from improving the operational efficiency of its mines.
Investors considering it today should know that a sharp pullback in precious metals prices would hit the stock. Moreover, the forward price-to-earnings ratio is a chunky 25, while the forecast dividend yield is just 2.4%.
That said, I think silver will head even higher in future. Reports say some governments have started stockpiling it as a strategic reserve. And it’s now part of the US’s critical minerals category, so Washington may follow suit.
Also, silver has industrial applications, ranging from electric vehicles to nuclear reactors. This can be a double-edged sword though, as demand can fall sharply when the global economy slows. Over time however, demand should stay robust.
Lastly, the gold-silver ratio is currently around 86:1. That means one ounce of gold costs about as much as 86 ounces of silver. On this basis, silver looks historically cheap, and could have further to run to narrow the gap.
My less exciting pick
Long term, I’m bullish on mining stocks in general and think many probably remain deeply undervalued. Fresnillo obviously was until recently, but I think it now looks more fully valued.
So my own pick to get portfolio exposure is BlackRock World Mining Trust from the FTSE 250. It has loads of gold and silver exposure through holdings like Agnico Eagle Mines, Wheaton Precious Metals, and Barrick Mining.
Granted, it faces the same risks associated with falling commodity prices. But it also offers diversification and a higher yield than Fresnillo (3.7%). The stock’s up 28% year to date, but I think it’s still worth a look.
