Showing posts with label Shell. Show all posts
Showing posts with label Shell. Show all posts

Thursday 5 July 2012

A UK Blue-Chip Starter Portfolio


Company
Industry
Share Price (Pence)
P/E
Yield (%)
HSBCFinancials5619.05.2
Royal Dutch ShellOil & Gas2,2257.65.0
BHP Billiton (LSE: BLT.L  )Basic Materials1,8067.64.3
British American TobaccoConsumer Goods3,24214.64.5
Tesco (LSE: TSCO.L  )Consumer Services3108.85.0
GlaxoSmithKlineHealth Care1,44711.45.3
Vodafone (LSE: VOD.L  )Telecommunications17910.97.4
Rolls-RoyceIndustrials85814.22.4
National GridUtilities67612.46.1
ARM HoldingsTechnology50632.20.9

Excluding tech share ARM, the companies have an average P/E of 10.7 and an average yield of 5.0%. The numbers were 9.8 and 5.2%, respectively, when I last carried out this exercise in October 2011.
So, the group is rated a bit more highly today than it was nine months ago. However, I think it still veers towards the value end of the spectrum, because my rule of thumb for this group of nine is that an average P/E below 10 is firmly in "good value" territory, while a P/E above 14 starts to move toward expensive.


Friday 22 June 2012

Investor's Checklist: Energy

The profitability of the energy sector is highly dependent on commodity prices.  Commodity prices are cyclical, as are the sector's profits.  It's better to buy when prices are at a cyclical low than when they're high and hitting the headlines.

Even though the sector is largely cyclical, many energy companies keep their bottom lines black during the troughs.  Look for this characteristic in your energy investments.

OPEC is a highly beneficial force in the energy sector because it keeps commodity prices above its costs.  It is worth keeping tabs on the cartel's strength.

Because of OPEC, we view exploration and production as a much more attractive area than refining and marketing.

Working in a commodity market, economies of scale are just about the only way to achieve a competitive advantage.  As such, bigger is generally better because firms with greater heft tend to be more profitable.

Keep an eye on reserves and reserve growth because these are the hard assets the company will mine for future revenue.

Companies with strong balance sheets will weather cyclical lows better than those burdened with debt.  Look for companies that don't need to take on additional debt to invest in new projects while also paying dividends or repurchasing shares.


Ref:  The Five Rules for Successful Stock Investing by Pat Dorsey



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