Is Now The Perfect Time To Buy Rare Earth Minerals PLC, Hunting plc And Lamprell Plc?

Should you add these 3 resources stocks to your portfolio? Rare Earth Minerals PLC (LON: REM), Hunting plc (LON: HTG) and Lamprell Plc (LON: LAM)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

For many companies in the resources sector, 2015 is going to be something of a write-off. In other words, it is set to be one of the most challenging years in a very long time, with profits being hit, investor sentiment in decline and share prices having posted stunning losses. And, while there is likely to be more pain to come as companies in the oil and gas and mining sectors report their difficult years in the first quarter of 2016, there may also be a lot for investors to look forward to.

In fact, looking ahead to the forecast performance of resources stocks in 2016 highlights that the sector has considerable potential to deliver strong capital gains. And, with investors having the potential to change their views on the sector and begin to look ahead to improved financial performance from resources stocks, now could be a great time to gain exposure to oil and gas and mining companies.

For example, oil services company Hunting (LSE: HTG) is expected to post a fall in net profit of 75% in the current year. As a result, its share price has come under severe pressure in recent months and has fallen by 51% in the last year. However, investor sentiment could improve dramatically, since Hunting is expected to bounce back in 2016 with earnings growth of 58%. Certainly, this will not fully offset this year’s decline, but it is something for the market to potentially reward. And, with Hunting trading on a price to earnings growth (PEG) ratio of just 0.3, it appears to offer superb growth potential at a very reasonable price.

Similarly, oil services sector peer Lamprell (LSE: LAM) is also due to have a tough year in 2015, with its earnings set to fall by as much as 42%. As with Hunting, its shares have fallen heavily in the last year, with them being down by 20%, and this means that they now trade on an exceptionally low price to earnings (P/E) ratio of just 11.1. This indicates that there is significant upward rerating potential on offer – especially since Lamprell is forecast to deliver an 8% rise in its bottom line next year.

Furthermore, both Hunting and Lamprell offer excellent income prospects at the present time. They yield 3.5% and 2.1% respectively but, with strong profit and relatively low payout ratios of 62% and 30% respectively, shareholder payouts could rise at a rapid rate.

Meanwhile, Rare Earth Minerals (LSE: REM) has also endured a tough twelve months, with its share price falling by 44% during the period. However, its news flow continues to be relatively positive, with the company this week confirming the grant of a mining lease Yangibana Main, in which Rare Earth Minerals has a 30% stake. This is good news for the company and represents one of the critical milestones for the project and, with Rare Earth Minerals still to complete its pre-feasibility study, its shares could start to reverse their disappointing performance of recent months.

However, Rare Earth Minerals remains relatively high risk and, should news flow disappoint, its share price could come under pressure. So, while the potential within the lithium space is enticing, it may be best to pair the company up with more stable businesses due to the relatively high level of risk involved.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »