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Why I Hate Royal Dutch Shell plc

There is something to love and hate in almost every stock. But today, I’m in a fratchy mood, so here are five things I hate about Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US).

I don’t understand it

Wasn’t it a certain Warren Buffett who said you should never invest in things you don’t understand? I clearly don’t understand Royal Dutch Shell, because it hasn’t performed as I expected since I bought it in 2011. In fact, its probably the most disappointing FTSE 100 stock in my portfolio. Its share price is up less than 5% over the past two years, against a whopping 30% for the FTSE 100. That kind of mismatch makes me question my judgement.

It fails the Napoleon test

Napoleon liked a lucky general, and I like a lucky stock. Who can be sure of a company that has suffered so much lousy “luck” lately? The Anglo-Dutch oil giant has been beset by high costs, exploration charges, oil theft and supply disruptions in Nigeria, not to mention a European Commission probe into its pricing practices, attacks from environmentalists and adverse currency movements. You need all the luck you can get when operating in tough African environments, and Shell’s seems to have deserted it.

It is stretching my patience

Shell definitely has promise, with a large global investment programme in new capacity, which includes five major start-ups that management claims should add over $4 billion to its 2015 cash flow. Recent wins include a £10 billion dollar deal to develop a gas field with the Abu Dhabi National Oil Company, which is expected to last 30 years. Management is also looking to boost financial performance, rather than simply targeting gas and oil production volumes. That’s keeping me hanging in there, but waiting for some kind of payoff is heavy going.

It should be doing better right now

Yes, I know that Shell, like fellow oil major BP, is a large, vertically integrated company rather than a pure play on the oil price, but with a barrel of Brent Crude firmly above $100, it really should be doing better than this. BP has had a disastrous couple of years, but its share price has still risen at double the rate in that time.

Shell is playing ‘share-price chicken’ with me

I know that the moment my patience finally snaps and I sell Shell, it will recover. I’m not too hopeful this year, with the company on a negative earnings per share (EPS) forecast of -7%. Maybe next year, when EPS is forecast to grow 7%? Trading at just eight times earnings, compared to BP’s 11.7 times and BG Group‘s 14.8 times, the recovery must surely come, and I want to be there when it does. In the meantime, I can console myself with Shell’s 5% yield. At least there is some juice in this stock.

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> Harvey owns shares BP, BG Group and Royal Dutch Shell.