How Much Lower Can BP plc, Standard Chartered PLC & Antofagasta plc Go?

Can BP plc (LON:BP), Standard Chartered PLC (LON:STAN) and Antofagasta plc (LON:ANTO) keep on falling, or are we close to the bottom?

| 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.

Shares in BP (LSE: BP), Standard Chartered (LSE: STAN) and Antofagasta (LSE: ANTO) have all fallen heavily over the last two years. Most shareholders are sitting on losses.

However, the question to ask today is how much further these stocks might fall. Is the start of a recovery in sight, or should shareholders take a loss and sell?

Is now the time to start buying again?

BP

BP went into the oil downturn with a strong balance sheet and plenty of cash on hand. The firm’s chief executive, Bob Dudley, has consistently commented that he believes oil prices are likely to stay lower for longer than the market expects. The evidence so far suggests he might be right.

Analysts expect BP to report a net profit of $6.4bn for 2015, falling to $5.0bn in 2016. I think 2016 is likely to be the low point, but it’s possible the full extent of the financial damage caused by low oil prices won’t be felt until 2017.

At today’s price of around 365p, I believe BP would probably be a profitable buy over 3-5 years. However, the shares could easily fall further and there is a risk of a dividend cut.

BP is on my watch list, but I’m tempted to wait until later this year before deciding whether to buy.

Standard Chartered

The outlook does seem to be improving for Standard Chartered. Analysts expect 2015 to mark a low point for the bank’s profits, which are expected to rise from $1.1bn in 2015 to $1.7bn in 2016.

The latest consensus forecasts show earnings per share of $0.68 for 2016, implying a forecast P/E of 9.7. A dividend payout of $0.23 is expected, giving a potential yield of 3.4%.

Another point in Standard Chartered’s favour is that it passed the Bank of England stress tests at the end of last year, thanks to the additional capital strength provided by the bank’s $5.1bn rights issue.

On the other hand, Standard Chartered is heavily exposed to Asian markets and commodities. There’s clearly a risk that bad debt levels will rise significantly. Even if the bank survives, it may not prosper in this market.

I’m encouraged by the stronger forecast outlook for next year and rate Standard Chartered as a cautious buy, but I wouldn’t bet the house on it.

Antofagasta

I rate Chilean copper miner Antofagasta highly because it has two key qualities: low cost mines and net cash.

Antofagasta’s mines have remained profitable as the price of copper has fallen. The group’s latest production report shows that the firm expects to produce copper at a net cash cost of $1.35/lb in 2016. This compares to a market price of around $2.06/lb currently.

Production is expected to rise in 2016 as the group’s recently-acquired 50% stake in Barrick Gold’s Zaldivar mine makes a fuller contribution.

Of course, the market recognises these strengths. Antofagasta’s shares have always looked expensive.

Despite falling by 44% over the last year, the firm’s stock still trades on a 2015 forecast P/E of 27 and a 2016 forecast P/E of 29. With profits expected to fall further this year, I feel that the price is still a bit too high — but I am watching closely as I believe this could be an attractive recovery buy at some point.

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 Standard Chartered. 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

Investing Articles

Would Warren Buffett buy BP shares, as oil excitement grows?

Warren Buffett is a big investor in the oil business, and BP's performance has been attracting investor attention in results…

Read more »

Cropped shot of an affectionate young couple posing with a bunch of flowers in their kitchen on their anniversary
Investing Articles

Here’s how long-term loyalty to UK shares can lead to dazzling returns!

The most successful UK and US share investors buy shares to hold for the long term, as this report shows.

Read more »

Investing Articles

NatWest has just smashed brokers’ dividend forecasts!

After NatWest delivered a Valentine’s Day surprise to investors, our writer thinks the experts may have to raise their dividend…

Read more »

Investing Articles

The NatWest share price slips in early trading despite positive FY 2024 results. What’s the deal?

The NatWest share price is down slightly this morning after the bank released its final results for 2024. Our writer…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

My Legal & General shares have climbed just 7% — so how come I’m sitting on a 20% gain?

Harvey Jones' trading account is showing only a modest return on his Legal & General Shares, but on drilling down…

Read more »

Investing Articles

Prediction: the BP share price could rise in 2025 (or it might fall!)

Following this week’s release of the energy giant’s 2024 results, our writer reviews the prospects for the BP (LSE:BP.) share…

Read more »

many happy international football fans watching tv
Investing Articles

What’s gone wrong with the FTSE 100’s ‘King of Trainers’?

Feeling the pain of a 28% drop in the JD Sports share price over the past three months, our writer…

Read more »

Investing Articles

Is it too late for investors to consider buying these outstanding FTSE 100 shares?

Stephen Wright wonders whether now's the time to consider buying shares in the FTSE 100’s outstanding companies, despite some high…

Read more »