What You Were Buying Last Week: Royal Dutch Shell Plc


One of Warren Buffett’s famous investing sayings is “be fearful when others are greedy and greedy only when others are fearful” — or, in other words, sell when others are buying and buy when they’re selling.

But we might expect Foolish investors to know that, and looking at what Fools have been buying recently might well provide us with some ideas for good investments.

So, in this series of articles, we’re going to look at what customers of The Motley Fool ShareDealing Service have been buying in the past week or so, and what might have made them decide to do so.

Good value

Over the past year the FTSE 100 has risen nearly 11% (it had risen over 26% before the recent tumble, but that’s now by-the-by).  Over the same period the share price of Royal Dutch Shell Plc (LSE: RDSB) (NYSE: RDS-B.US) has actually gone down nearly 3%, and is only a whisker above its one year low, which was seen in mid-November 2012.  So what might have made some investors put Shell at number six in the latest “Top Ten Buys” list*.

Well, capital growth isn’t everything (although it’s preferable to an actual decrease, obviously). As the biggest company in the FTSE, Shell’s role is to generate a substantial and reliable dividend stream for its shareholders, something it has a good track record of doing. Last year its shares yielded 5% — well above the FTSE 100 average. This year the yield is expected to be around 5.5%, and is forecast to rise to 5.7% in 2014.

Currently under 8, Shell’s forward P/E is lower than its main rivals, suggesting that it’s good value for money at the moment, so long as it can keep the earnings rolling in and, ideally, growing. Whilst analysts expect Shell to experience a period of earnings stagnation over the next couple of years, with demand for oil and gas set to continue rising for the foreseeable future, and with a substantial portfolio of major projects in the pipeline, Shell should be able to deliver over the long term.

But of course, no matter what other people were doing last week, only you can decide if Royal Dutch Shell really is a ‘buy’ right now.

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> Jon owns shares in Royal Dutch Shell.

* based on aggregate data from The Motley Fool ShareDealing Service.