Could BHP Billiton plc, Fenner plc & Ophir Energy Plc Help You Retire Early?

Is now the right time to buy into a potential recovery at BHP Billiton plc (LON:BLT), Fenner plc (LON:FENR) or Ophir Energy Plc (LON:OPHR)?

| 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.

sdf

Shares in BHP Billiton (LSE: BLT), Fenner (LSE: FENR) and Ophir Energy (LSE: OPHR) have all fallen by about 30% so far this year.

The commodity sector is seriously out of favour at the moment — but this won’t last forever. Could buying at today’s prices provide bumper profits in a few years’ time, and form the basis of a healthy retirement portfolio?

BHP Billiton

Shares in BHP Billiton have fallen by nearly 10% since last week, when the tailings dam of BHP’s jointly owned Samarco iron ore mine in Brazil collapsed, killing at least four people and leaving 20 people missing.

At the moment, efforts are rightly focused on addressing the human tragedy and beginning to understand what went wrong. However, the financial impact of the disaster will also be significant. Estimates of the likely total cost to BHP vary from tens of millions to as much as $1bn.

Iron ore from the mine accounted for around 3% of BHP’s underlying operating profit, according to a statement from the firm. The loss of this income means that BHP’s free cash flow may not cover its planned dividend this year, forcing the firm to choose between cutting the payout and increasing borrowings.

Despite this, the majority of BHP’s assets remain attractive on a long-term basis. At less than 1,000p, I see the shares as a strong buy with good medium-term recovery potential.

Ophir Energy

Shares in oil and gas group Ophir Energy rose by 6% this morning after the firm said it was in the final stages of signing up future customers for its Fortuna liquefied natural gas (LNG) project in Equatorial Guinea.

Funding for the project is also being developed and is expected to include a mix of equity and debt funding to provide good upside for Ophir shareholders.

In the short-term, there was also good news. Full-year production from Ophir’s oil and gas fields in Asia is now expected to be around 12,700 barrels of oil equivalent per day (boepd), up from previous guidance of 11,000-12,500 boepd.

At 100p, Ophir shares trade at a discount of nearly 40% to the firm’s last reported book value. The firm’s undeveloped gas assets have the potential to create significant value for shareholders, but a long-term view is likely to be necessary.

Fenner

Shares in reinforced polymer technology firm Fenner fell by 8% this morning after the firm issued a profit warning for the current year alongside its results from last year.

The big problem for the group is the sustained decline in the US coal industry, which is a major buyer of Fenner’s heavy duty conveyor belts. Operating profit from Fenner’s conveyor business fell from £44m to £23.3m last year, despite better results elsewhere.

Fortunately, Fenner’s other division, Advanced Engineered Products, is doing better. Operating profit fell slightly from £43.6m to £41.0m, due to weakness in the oil and gas industry, but demand from the group’s medical and industrial customers remained strong.

Based on today’s profit warning, I estimate that Fenner’s underlying earnings per share are likely to fall to 9-10p next year. A cut to last year’s 12p dividend payout seems almost certain.

Fenner could be a good recovery play at some point, but now might be too soon to buy, in my view.


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.

Roland Head owns shares of Fenner and BHP Billiton. 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

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

After the FTSE 100 broke 9,000 points, does the UK market look overvalued?

The FTSE 100 went past 9,000 points this week but Mark Hartley says there are still bargains out there and…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Nvidia stock hit an all-time high this week. But could it be a bargain, even now?

After the Nvidia stock hit an all-time high this week, might it still be an attractive opportunity for our writer's…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As the FTSE 100 hits an all-time high, I’m following Warren Buffett’s advice!

Billionaire investor Warren Buffett is a font of stock market wisdom. Our writer reflects on his approach, as the FTSE…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

The FTSE 100 reached an all-time high this week. Is it too late to invest?

The FTSE 100 hit a new all-time high level over the past few days. Our writer explains why he thinks…

Read more »

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Investing Articles

Here’s how £9,000 in savings could be used to target £343 a month of passive income

Christopher Ruane sets out a passive income plan that he reckons could help someone make sizeable sums over time without…

Read more »

ISA Individual Savings Account
Investing Articles

How to build a Stocks and Shares ISA with a 6% dividend yield

It’s easy to build an investment portfolio with a high dividend yield today. But investors need to manage risk carefully,…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How risky is switching from cash savings to a Stocks and Shares ISA?

The UK government is making moves to encourage cash savers to consider investing via Stocks and Shares ISAs. But what…

Read more »

Friends and sisters exploring the outdoors together in Cornwall. They are standing with their arms around each other at the coast.
Investing Articles

4,985 shares of this FTSE dividend star pay an income equal to the State Pension!

Zaven Boyrazian calculates how many shares investors would have to buy to generate enough income to match the UK State…

Read more »