Uncertainty In Syria Makes Me Turn To Royal Dutch Shell Plc

With the situation in Syria continuing to be uncertain, I’m thinking of buying more Royal Dutch Shell Plc (LON: RDSB).

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.

I’ve found during my career as a private investor that opportunities sometimes come along as a result of high levels of uncertainty.

Indeed, although the recent events in Syria are truly awful, such events create a substantial amount of uncertainty among the investment community — especially when they involve the prospect of military action.

Therefore, it has been of little surprise, given recent events, that oil saw its biggest daily rally in over six months, as the prospect of US and Western military action unsettled commodity markets across the world.

ICE October Brent gained 3.3% to a six-month high of $114.35 per barrel, as the market became concerned that the situation in Syria could spill over into Iraq and possibly Iran, impacting oil production in those countries.

Indeed, Iran and Saudi Arabia, two of the largest oil-producing nations in the world, seem to have backed opposing sides in the Syrian conflict. This has added to fears surrounding the potential outcome and its subsequent impact on oil production.

So, with the oil price firming up and looking as though it could yet go higher, I’m thinking of buying some more shares in Shell (LSE: RDSB) (NYSE: RDS.B.US).

One of the main reasons is quite straightforward: a higher oil price is good for Shell. Indeed, for any company that sells a commodity, a higher price is better: it means higher margins and higher profits than a lower price does.

In addition, Shell is remarkably cheap at the moment. It trades on a price-to-earnings (P/E) ratio of just 7.5. This is just over half the P/E of the FTSE 100 and is significantly less than the oil and gas industry group, which has a P/E of 12.5.

Of course, there is little in the way of growth forecast for the next two years, with the market anticipating a decline of 10% in earnings per share this year and a gain of 6% next year. However, a P/E of 7.5 looks ripe for an upwards rerating, even if earnings decline slightly in the coming year or two.

In addition, shares yield an impressive 5.3% and, with inflation still being a headache and bank savings rates still being relatively poor, Shell looks very attractive for income-seeking investors like me.

Of course, you may already hold Shell or be looking for other potential yield plays. If you are, I would recommend you take a look at this exclusive report that details The Motley Fool’s Top Income Share.

It is completely free and without obligation to view the report and it could be just what your portfolio needs. Click here to take a look.

> Peter owns shares in Shell.

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.

More on Investing Articles

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

This forgotten FTSE 100 gem could be the best bargain on the stock market

The FTSE 100 is full to the brim of high-quality businesses. But this Fool has his eye on this 'forgotten'…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Here’s a FTSE 250 stock I’d put 100% of my money into

If this Fool could buy just one stock from the FTSE 250, Games Workshop would be his choice. Here, he…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

2 reasons Warren Buffett might love this stock, and 1 reason he might avoid it like the plague

Warren Buffett's one of the best stock pickers of all time. But would he approve of Barclays shares? This Fool…

Read more »

Union Jack flag triangular bunting hanging in a street
Investing Articles

Down 28% in a week! What’s going on with the share price of this FTSE 250 British icon?

There’s one stock in the FTSE 250 that took a bit of a battering last week. But I’m not surprised,…

Read more »

Two white male workmen working on site at an oil rig
Investing Articles

At around £28.50, Shell’s share price looks cheap to me

Shell’s share price still looks undervalued against its fossil-fuel-focused rivals to me, despite it pushing back its carbon reduction targets.

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

433 shares in this FTSE 100 dividend superstar could make me £18,803 in annual passive income!

This overlooked FTSE 100 gem has one of the best yields in the index, looks undervalued, and makes me big…

Read more »

Investing Articles

2 under-the-radar investment trusts I’d buy for a new Stocks and Shares ISA

Here are two fantastic trusts that I'd happily snap up today if I were building a Stocks and Shares ISA…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

If I’d put £1k in Games Workshop shares 5 years ago, here’s how much I’d have now!

Games Workshop shares have proved to be a stellar investment in recent years. Charlie Carman examines whether this trend can…

Read more »