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Stockwatch: This turnaround wrong-foots short-sellers

Stockwatch: This turnaround wrong-foots short-sellers

After a terrible run, this bombed-out stock is at an inflection point, argues Edmond Jackson, backing the shares as a recovery play.

Are general elections good or bad for the stockmarket?

Are general elections good or bad for the stockmarket?

Analysis from Schroders has revealed an interesting relationship between elections and stockmarket performance. Josh Lee takes a closer look.

How our trust tips have fared so far in 2017

How our trust tips have fared so far in 2017

Our adventurous portfolio make hay while the sun shines, but the conservative version get a makeover for its Asia and global constituents. Fiona Hamilton explains.

Next recovery comes to abrupt end

Next recovery comes to abrupt end

Next's sales fell in Q1, triggering another cut in full-year profit guidance and a 7% share price dive, writes David Brenchley.

How big yielder HSBC smashed forecasts

How big yielder HSBC smashed forecasts

It's had a wobble after a stunning year-long rally, but could HSBC be ready for a crack at a new four-year high? Lee Wild investigates.

City back in love with Shell after profits beat

City back in love with Shell after profits beat
Shares in Royal Dutch Shell bounced sharply after matching rival BP's well-received first-quarter results, reports David Brenchley.
An expectations-busting week for oil companies continued Thursday as LSE:RDSB:Royal Dutch Shell smashed analyst forecasts thanks largely to a sharp rise in oil prices.
Taking a lead from rivals including fellow London-listed oil major LSE:BP.:BP and US peers NYSE:XOM:ExxonMobil and NYSE:CVX:Chevron, the Anglo-Dutch big-hitter reported a big leap in profits for the first three months of 2017 and maintained its generous dividend.
First-quarter underlying profit on a current cost of supplies (CCS) basis rocketed 142% year-on-year to $3.75 billion.  That's almost a quarter higher than consensus estimates of $3.05 billion. Post-tax operating profit of $4.21 billion was over £700 million ahead of forecasts, and CCS earnings attributable to shareholders rose more than fourfold.
Shell, now benefiting from last year's £35 billion acquisition of BG Group, received a major boost from higher oil prices, 57% higher this quarter than a year ago.  
Profits at the upstream division - oil exploration - missed City targets, but downstream had a great quarter, making $2.49 billion, 29% above consensus, driven by the oil products and chemicals businesses.
In reaction, Shell's share price ticked up 3.6% Thursday to a high of 2,135p, though still over 10% off January's two-year high near £24.  Crucially, for income investors, the quarterly dividend stays at $0.47 per share and, despite earnings per share at just $0.43, UBS analyst Jon Rigby still expects $1.88 for the year, giving a prospective yield nudging 7%.
Boss Ben van Beurden called it a "strong" three months, as the company continues to reshape its portfolio. Shell made $20 billion worth of divestments, including UK North Sea oil assets as well as ventures in Saudi Arabia, Canada and New Zealand.
Cash flow from operating activities was $9.5 billion, 9% higher than UBS's estimates. A working capital build of $1.83 billion implies an underlying operating cash flow of a "mighty" $11.3 billion, according to the broker.
This year, Shell will invest around $25 billion and deliver a number of new projects, van Beurden said, which he expects to generate $10 billion in cash flow from operating activities by 2018.
Barclays analyst Lydia Rainforth, a long-time Shell fan, says the numbers have "positive implications" for the stock and, given debt is running high due to its early 2016 acquisition of BG Group, the yield on Shell's cashflow is a more important metric for the firm than earnings.
Having outperformed expectations on cashflow, and with sale proceeds due in coming quarters, "it seems clear that Shell has reached the critical path of seeing gearing fall and is supportive for the shares," Rainforth added.
Both Rainforth and UBS's Rigby have the stock priced higher, with the former more bullish at 2,750p, implying potential upside of 30%.
Rigby, meanwhile, sticks with his £25 target, which has Shell trading at a multiple of 7.0 times enterprise value/debt-adjusted cashflow (based on $60 oil), a 15% premium to its three-year average, "with the increase reflecting improved capital productivity".
On that valuation, the stock also trades at a modest premium to peers BP (6.75 times) and LSE:TTA:Total (6.4 times), "reflecting the portfolio opportunity".
Van Beurden plans on creating a "world-class investment case" for Shell. A big chunk of that case rests on the fortunes of the oil price, as shown by the renewed vigour in oil majors' results. That oil price has slipped by around 10% in the past three weeks to around $50 a barrel.
Opinion is split in the City on oil prices, with Stephen Jones, chief investment officer at Kames Capital, expecting the price to stay "lower for longer". On the flip side, Bill McQuaker, multi-asset portfolio manager at Fidelity, sees "a more encouraging picture for oil".
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Shares in Royal Dutch Shell bounced sharply after matching rival BP's well-received first-quarter results, reports David Brenchley.

The Oil Man: Amerisur, Sound Energy, Shell and Ithaca

The Oil Man: Amerisur, Sound Energy, Shell and Ithaca

Oil industry analyst Malcolm Graham-Wood has seen it all. He gives Interactive Investor his opinion on the sector's top stories.

Why Anglo American shares could bounce big

Why Anglo American shares could bounce big

After hitting Alistair Strang's targets set almost a year ago, the chartist has spotted a new long-term target for this mining heavyweight.

Rise of the robots: Are fears that machines will take control just artificial hype?

Rise of the robots: Are fears that machines will take control artificial hype?

Andrew Darley, technology analyst at finnCap, explores the trend towards automation, mass job losses and huge investment in artificial intelligence.

10 most popular funds - April 2017

10 most popular funds - April 2017

Neil Woodford's new income fund has climbed up our top 10 table, but has it dislodged Terry Smith from top spot. Kyle Caldwell reveals all.

10 best stocks for high-yield dividend investors

10 best stocks for high-yield dividend investors

To overcome uncertainty around dividend payouts, Stockopedia's Ben Hobson screens for high quality firms with big yields.

Sage attacking 17-year high

Sage attacking 17-year high

Accountancy software is not exciting, but Sage shares are, and this blue-chip is confounding the critics with a stellar performance, reports Lee Wild.

Sainsbury's slashes dividend again as profits fall

Sainsbury's slashes dividend again as profits fall

Argos is acting as a 'get out of jail' card for Sainsbury's, reports David Brenchley, as profits fall and the dividend is slashed again.

The Oil Man: Trinity Exploration, Range Resources, Amerisur

The Oil Man: Trinity Exploration, Range Resources, Amerisur

Oil industry analyst Malcolm Graham-Wood has seen it all. He gives Interactive Investor his opinion on the sector's top stories.

A mid-cap share capable of double-digit upside

A mid-cap share capable of double-digit upside

This bookie is in the trouble zone currently, warns Alistair Strang, but the chartist sees a longer-term route towards a nine-month high.

Six investment trusts to consider selling

Six investment trusts to consider selling

Should you heed the old maxim 'sell in May'? Investment experts tell Marina Gerner the trusts they would get rid of as part of this traditional spring clean.

Is it finally worth shopping for Ocado shares?

Is it finally worth shopping for Ocado shares?

They've been hard to love for years, but might Ocado shares repay faithful investors at last, asks Lee Wild.

Why high-yielding BP can still top 600p

Why high-yielding BP can still top 600p

BP's Q1 results beat expectations and the knockout dividend looks sustainable, implying the shares remain 'meaningfully undervalued', writes David Brenchley.

This is why May has a bad reputation for shares

This is why May has a bad reputation for shares

We've all heard the saying 'sell in May'. But does the data back up the adage? Stephen Eckett investigates.

Chart of the week: Why this blue-chip should rally from here

Chart of the week: Why this blue-chip should rally from here
These heavyweight shares are at a level of strong support, which technical analyst John Burford believes should trigger significant upside.

These heavyweight shares are at a level of strong support, which technical analyst John Burford believes could trigger significant upside.