Why I Would Buy Barclays PLC But Sell Hardy Oil & Gas plc And Kenmare Resources plc

Royston Wild looks at the investment prospects of Barclays PLC (LON: BARC), Hardy Oil & Gas plc (LON: HDY) and Kenmare Resources plc (LON: KMR).

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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.

Today I am running the rule over three headline-making, London-listed stocks.


I believe that global banking giant Barclays (LSE: BARC) (NYSE: BCS.US) is in great shape to deliver exceptional earnings and dividend growth in coming years. Of course, the company faces an ongoing headache in the shape of escalating legal bills, but I believe that the fruits of surging retail business — not to mention the effect of significant cost-cutting and de-risking, achieved through the scaling back of its Investment Bank — makes it a highly-appealing stock selection.

The City expects Barclays to punch earnings growth to the tune of 45% in 2015 and 18% in 2016, figures which leave the business dealing on P/E readings of 10 times and 8.5 times prospective earnings for these years — any reading below 10 times is widely considered too good to miss.

This explosive growth is also expected to drive dividends through the roof, with a payment of 6.5p per share shelled out in each of the past three years anticipated to rise to 8.6p this year and 11.6p in 2016. Consequently the yield leaps to 3.4% for 2015 and to 4.5% next year.

Hardy Oil & Gas

Embattled oil explorer Hardy Oil & Gas (LSE: HDY) is one of biggest movers in Monday business and was recently trading 14.8% higher on the day. Still, price volatility at the company — like the rest of the fossil fuels sector — is nothing new as uncertainty continues to wash across the oil market, and the company remains very much on a downtrend.

As a consequence I believe that today’s bounce will prove nothing but a short-lived phenomenon, and reckon that Hardy Oil & Gas is likely to add to the 75% stock price loss suffered since July. While it would be grossly unfair to say that the firm is on the brink of financial ruin — the business advised in November that it “is well funded to meet its future work commitments” — the lack of communication since then has left investors scratching their heads as to the state of the balance sheet.

On top of this, City analysts expect Hardy Oil & Gas to see losses per share widen as a result of the deteriorating crude price, to 6.5 US cents per share for the year concluding March 2015 from 5.6 cents in 2014. Given these uncertainties, I believe that the business is a risk too far for savvy stock hunters.

Kenmare Resources

Likewise, I believe that Kenmare Resources (LSE: KMR) is a perilous investment destination owing to question marks over the state of the company’s cash situation.

Prices in the minerals play have stabilised since the start of the year and were last dealing 11.4% higher in Monday trade. The business has been buoyed by rumours that it is about to be acquired by Iluka Resources Limited, the company having returned after having a takeover bid rebuffed during 2014.

Kenmare has endured a number of difficulties at its flagship Moma mine in Mozambique in recent times, and just this month suffered a power outage due to flooding at the site. With such issues likely to whack earnings performance, not to mention the scale of any bid from Iluka — should one even be forthcoming — and commodity prices likely to remain in the doldrums for some time yet, I reckon that investors should steer clear of the natural resources specialists.

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 considered so you should consider taking independent financial advice.

Royston Wild 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.

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