The Motley Fool

Are Glencore PLC & Premier Farnell plc Set To Rise Quicker Than Xcite Energy Limited, Premier Oil PLC & KAZ Minerals PLC?

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.

Overstretched

KAZ Minerals (LSE: KAZ) closed at 150p on Friday. It dropped to 139p on Monday, hitting 104p on Tuesday. It currently trades at 108p, but its high level of indebtedness could seriously jeopardise the value of your investment even at this price. Most financial metrics indicate that its current valuation — which stands at a 52-week low, and 60% below a one-year high of 280p — may not fully take into account a deteriorating cash position. Its net debt rose to $1.5bn at the end of June from $962m six months earlier, which implies a net leverage of 17x. 

Looking For Fair Value

Xcite Energy (LSE: XEL) closed at 23p on Friday. It dropped to about 20p on Tuesday, but has bounced back to 21.5p since. It currently trades close to a 52-week low of 19.75p, and some 65% below a one-year high of 63p — however, I am not too bearish based on fundamentals. This fossil fuel explorer is a different investment than KAZ, but one that is similarly exposed to the vagaries of the global economy. With oil prices at these levels for longer, it will find it difficult to deliver on its promises. It recently argued for a net present value “of the reserves for the Bentley field of about “$1.9bn, $2.3bn and $2.6bn on a 1P, 2P and 3P basis, respectively”. As the company acknowledges, that does not represent its fair market value.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

A Risky Macro Play

Premier Oil (LSE: PMO) closed at 78p on Friday. It plunged to 64p on Tuesday, and currently trades at 66p, which is about 80% lower than a 52-week high of 343.5p. It said yesterday that production remained “ahead of full year guidance of 55 kboepd, before any contribution from Solan,” which indicates that if you are really bullish on the global economy you might not run the risk of losing a fortune investing in its shares at these levels. Still, its balance sheet carries too much debt based on its cash flow generation, so I’d be careful before snapping up its stock. It’s easy to argue that its brand new covenants remain tight, while capital requirements are significant. 

(If volatility subsides, KAZ, XEL and PMO will not necessarily rise as quickly as other companies whose fundamentals and business pipelines look more promising right now. Read on…)

Recovery 

The rise and fall in the valuation of Glencore (LSE: GLEN) has been spectacular in recent days and weeks. The shares traded around 130p on Friday, but they have plunged to a lowly 99p on Tuesday — hitting another record low. At its current valuation of 108p, its stock is dirt cheap based on most metrics, so a calculated bet would make sense. The risk is that its restructuring plan won’t work according to plans (some assumptions are very bullish, in my view) — hence, you are advised to hold GLEN only as part of a properly diversified portfolio.

The same applies to Premier Farnell (LSE: PFL), which issued a profit warning a week ago — but there are caveats. Since 17 September its stock has plunged from 133p to 100p: does its share price currently take into consideration the recovery potential of this electronics manufacturer? Citigroup today cut its price target from 140p to 90p, which is not terrible news. In fact, you’d be buying into a restructuring story for less than 10 times its forward earnings. PFL could be a nice alternative to any investment in the commodity sector: leverage is manageable, and the group is paying attention to working capital management — yet its price-to-book value signals risk…

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Alessandro Pasetti 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.