Following an acquisition announcement in August this year, the UK Oil and Gas Investments (LSE: UKOG) share price has seen a turn for the better. The momentum was sustained through September as it saw its price rise by over 16% from the month before. It has corrected somewhat in the past few days, but is still elevated compared to pre-August levels.
Lack of clarity
For an interested investor, this might sound like a good time to buy shares of the AIM-listed company, but I’m not so sure it’s the right buy at present with a view to the long term. It’s true that after acquiring Magellan Petroleum, it now has greater control over the drilling programme at Horse Hill, which holds plenty of promise by way of reserves. But it might be some time before it becomes either a noteworthy revenue generator or a profit-making entity or both. I’m not holding my breath.
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I would much rather look at more dependable options among FTSE 100 companies that are far less volatile and are likely to help grow investor capital in the coming days and beyond. Consider the London Stock Exchange Group (LSE: LSE), for instance. In the past year alone, its share price has risen by almost 27% and over the past five years, it has risen a whole 226%.
Its steadily rising revenues over the past few years have no doubt played a role in its share price performance, even if net income hasn’t been growing quite as steadily. I think the group’s prospects look good. More analysts put a ‘Buy’ rating on it than not and it’s also in expansion mode, having made two acquisitions in the recent past. Earlier in the year, it acquired data provider Beyond Ratings, which focuses on areas like the environment and governance, in a bid to increase the scope of its Information Services business. Then in August, it announced that it’s acquiring financial markets’ data provider Refinitiv, which is set to significantly increase the scale of its data and information provision.
The LSE group itself was a buyout target of the Hong Kong stock exchange, but the latter dropped the pursuit a few days ago. If the deal had gone through, the combined entity would have become the third-largest stock exchange in the world and investors were disappointed at this development, with a 6% share price fall on the day of the announcement. However, as the LSE group points out, among other things, the uncertain situation in Hong Kong is a stumbling block. I would have cautiously watched the developments of the deal if it had gone through at this stage.
LSE’s share price has recovered since the news hit, though. Maybe not quite all the way, but given its performance in the recent years, I have little doubt that it will continue to perform going forward. I would strongly consider it as a pick for 2020.