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The Shell share price crashed 50% in 2 years. I’d buy RDSB now

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Oil pipes in an oil field
Image source: Getty Images.

The past two years have been rough for shareholders. The damage was done last year, when the FTSE 100 crashed spectacularly, before rebounding strongly after March 2020. On 23 April 2019 — two years ago — the FTSE 100 index closed at 7,523.10 points. On Friday, the Footsie closed at 6,938.60, down almost 585 points — a loss of 7.8% in two years. But some FTSE 100 shares really slumped badly. And the Royal Dutch Shell (LSE: RDSB) share price was among the biggest losers.

FTSE 100 winners and losers

In total, 98 shares have been in the FTSE 100 over the past two years. Of these, 63 stocks have climbed since April 2019. These gains range from 158.3% to 0.7%, with the average at 36.9%. At the other end of the scale lie 36 losers. Losses for these stocks range from 1.7% to 67.6%. The average loss among these laggards is just over a fifth (20.1%). Although the Shell share price isn’t the very worst, it’s close. Royal Dutch Shell’s dual-listed stocks are at #97 and #98 in this losers’ gallery.

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The Shell share price crashes

Over the past two years, the Shell share price has almost halved, falling 49.1%. During this time, the oil giant’s market value has fallen by a staggering £100bn. That’s a sum greater than the valuations of all but a few UK companies. It’s also roughly 5% of the FTSE 100’s total value. But this crash doesn’t reveal the full picture.

Three years ago, the Shell share price was sitting pretty. On 21 May 2018, RDSB closed at 2,841p, but this all-time closing high quickly faded. At the end of 2019, RDSB closed at 2,239.5p. But then came the horrors of Covid-19, swiftly followed by a dramatic oil-price collapse. The price of a barrel of Brent Crude crashed from $70 to below $16 within three months.

Of course, with the world in crisis, the Shell share price tanked. But its lows didn’t come during ‘Meltdown March’ 13 months ago. RDSB’s rock-bottom came on 28 Oct 2020, when it collapsed to close at 866.4p. That’s close to £20 below the May 2018 high — a fall of almost seven-tenths (69.5%). That very day, I said I’m sure Shell will be well.

Oil be back: Shell shares hit a gusher

The good news for Shell-shocked shareholders is that the Shell share price has soared since Halloween. In November, news of highly effective Covid-19 vaccines sent RSDB gushing upwards. On Friday, the shares closed at 1,294.6p. That’s almost half (49.4%) ahead of their October low. But they’ve been even higher in 2021, closing at 1,518p on 12 March.

Right now, I think the Shell share price has further to go, so I’d buy at current levels. Why? Because Shell is a global behemoth, employing 80,000 people in over 70 countries. Its origins date back to 1907, giving it a 114-year pedigree. Selling millions of barrels of ‘black gold’ each day produces huge cash flows for investment and shareholder enrichment. Shell suspended share buybacks and slashed its dividend in 2020. But the dividend yield is still 3.6% a year, slightly above the FTSE 100’s.

Lastly, the Shell share price is heavily dependent on the future oil price. Right now, Brent Crude trades at $66.11, having more than tripled in a year (+205.6%). But if oil demand fails to pick up, or the widely expected global economic boom doesn’t arrive, then that’s a body blow for Shell. Even so, I’d take the risk and buy Shell at under £13 today!

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Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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