It’s clear from the chart the stock and the business have been recovering well. There was volatility in the oil and gas industry during and after the pandemic because of unstable commodity prices, such as oil. Hunting suffered because its customers were having a hard time.

The firm provides precision-manufactured equipment and premium services for the global oil & gas market but that’s not the whole story. It also serves the defence, power generation, space and aviation sectors.

We can’t ignore cyclicality

However, despite the diversification of operations, the biggest risk for shareholders remains the cyclical nature of the company’s end markets. Things are going well for the business now, but that situation may change fast. If there’s another general economic downturn or some other global shock, it would be easy to lose money with Hunting shares.

Nevertheless, today’s (29 August) half-year results report is full of positives. In the first six months of 2024, revenue rose by 3% year on year and adjusted diluted earnings per share shot up by more than 60%.

However, there may be more to come. The order book increased by 32% to “record” levels. That outcome was partly driven by large orders from the Kuwait Oil Company during the period.

Meanwhile, those City analysts reckon normalised earnings are set to increase by almost 40% next year on top of the healthy gains expected for 2024.

Chief executive Jim Johnson said the results demonstrate the strength of offshore and international markets. On top of that there’s been “steady progress” in the energy transition industry.

Expanding into new technologies

In a separate announcement today, the company revealed $60m worth of orders from major North Sea operators for organic oil recovery contracts over a five-year period. It seems the operational momentum is continuing at pace, and for the time being there’s little sign of any cyclical weakness.

Johnson reckons the orders are a “significant” step towards the expansion of organic oil recovery technology. They demonstrate “confidence” in Hunting’s ability to deliver new technologies for the energy industry.

Overall, Johnson’s assessment of the outlook for the business was upbeat and positive.

But is the stock a buy for investors right now? I think it may well be worth consideration as part of a diversified portfolio for those wanting exposure to the oil, gas and energy sectors. After all, the valuation doesn’t look excessive.

With the share price near 417p, the stock is changing hands at around just over 10 times next year’s predicted earnings. That compares to the FTSE All-Share index with its forward-looking price-to-earnings ratio around 12.5.

On balance, and despite the risks, I reckon Hunting’s strong operational momentum and modest-looking valuation makes the business well worth deeper research and consideration now.

The post With orders and earnings shooting higher, is this FTSE 250 stock a buy? appeared first on The Motley Fool UK.

Some stocks in the energy sector have been waking up recently because of improved trading in their underlying businesses.

I’m talking about oil & gas companies along with the many enterprises that support the exploration and production industry.

For example, there’s been recent share price strength for names like Shell, BP and Serica Energy.

Positive investor sentiment

The price of oil has spent most of 2024 rising, so that’s helped the sector. However, the entire industry can suffer famine or feast conditions because of that one factor alone. Cyclicality is the name of the game here, and that brings both opportunity and risk for investors targeting stocks like the one I’m about to talk about.

However, it’s possible we could be near the beginning of an enduring period of prosperity for the sector. Meanwhile, investors may be looking for the next big thing after running up high-growth tech stocks to eye-popping valuations (particularly in the US). Could the energy sector and commodity-related industries be it? Perhaps.

The most important thing to evaluate is the businesses and how they’re performing operationally. However, general investor sentiment can play a big part in the success or failure of any programme of investment in stocks and shares — so it’s worth considering as part of general research before buying.

The energy sector looks promising to me right now, and the stock I’m focusing on is Hunting (LSE: HTG).

The firm makes precision engineered products and integrated systems, and a print-part manufacturing services. It focuses on the global oil & gas market but also serves the aviation, defence, power generation and space sectors.

Restructuring and refocusing

One of the key things here is the directors are working to streamline and refocus the business. So we’re seeing asset sales and other measures aimed at reducing costs and defining the precise way forward for the company. Such restructuring can be a good thing and lead to better profits later.

Meanwhile, City analysts offer some robust predictions for normalised earnings. They expect increases of almost 90% this year and just over 30% in 2025. But that’s after the business made losses in 2020 and 2021 – such are the outcomes of cyclicality.

The share price chart here tells the story of the longer-term volatility in the enterprise.

There are risks, for sure. But I’m encouraged by the firm’s robust-looking balance sheet and modest valuation. With the share price near 328p (3 April) the forward-looking price-to-earnings ratio for 2025 is running at just over eight.

The company anticipates a dividend set to yield almost 3% in 2025 – handy income to collect while waiting for further business progress to unfold.

I’m fully invested with no spare cash right now, but this stock is at the top of my research and buy list for April when funds become free.

The post 1 FTSE 250 stock I want to buy in April appeared first on The Motley Fool UK.

BP

What it does: BP is a global oil and gas company. It’s one of the largest companies in the world measured by revenues.

By Charlie Keough. The BP (LSE: BP.) share price has been gaining momentum in 2024. As I write, it’s up 7.2% year to date.

As such, I decided to increase my holdings in the Footsie powerhouse. The stock looks cheap, trading on around seven times trailing earnings. To go alongside that, it boasts a 4.5% dividend yield. That’s above the FTSE 100 average of 3.9%.

The largest risk to the business is the transition to a greener future. We’ve seen mounting pressure placed on firms such as BP in recent years.

However, I’m confident it’ll be some time before we see fossil fuels completely phased out. It has been widely touted that the target for reaching net zero is 2050. But that’s now being questioned. What’s more, BP has a strong energy transition strategy in place.

At its current price, I couldn’t resist. If I have any spare cash going forward, I may look to pick up some more shares.

Charlie Keough owns shares in BP.

GigaCloud Technology

What it does:  GigaCloud’s platform connects furniture factories in Asia with resellers in Western Europe and North America.

By James Fox. GigaCloud Technology (NASDAQ:GCT) has created a niche for itself, connecting ‘large parcel retailers’ – furniture makers – typically in China, with resellers and consumers in higher wealth markets. As such, the name is slightly misleading, and having followed analysis of this stock closely in recent months, it’s putting some investors off. 

Nonetheless, the business looks highly attractive. It’s trading at 14.1 times forward earnings and 11.7 times earnings for 2025. GigaCloud is a business in overdrive, with revenue increasing 94.8% over the past 12 months. Management recently guided towards another strong quarter, with revenue above estimates. 

There is some concern about the impact of Red Sea disruption on the business. However, management has suggested that Asia-Europe is a much smaller part of its business compared to Asia-North America. There was no mention of the Panama drought. 

All in all, I find this highly volatile stock an attractive long-term pick, with considerable potential for share price growth. 

James Fox owns shares in GigaCloud Technology.

Hunting

What it does: Hunting produces specialised equipment used for oil and gas drilling and related activities.

By Roland Head. I added Hunting (LSE: HTG) to my portfolio in early March, after the company published a strong set of 2023 results and confirmed a positive outlook for 2024.

Hunting suffered during the pandemic period due to a slowdown in drilling activity. This highlighted the company’s main weakness – it’s heavily cyclical and dependent on the spending plans of its energy producer customers.

However, demand recovered strongly last year, with revenue up 28% to $929m and pre-tax profit of $50m, reversing a 2022 loss. The company’s balance sheet remained in good health, in my view, with modest net debt of $33m and an overall net asset value of $957m.

This net asset figure is equivalent to a book value of around 455p per share, substantially above Hunting’s recent share price of 320p. I think there’s value here – also highlighted by the stock’s 2024 forecast price-to-earnings ratio of 10 and dividend yield of 2.8%.

Roland Head owns shares in Hunting.

Imperial Brands

What it does: Manufacturers and markets tobacco and tobacco-related products to customers in the UK and abroad.

By Mark David Hartley. With headquarters in London and Bristol, Imperial Brands (LSE:IMB) is one of the largest multinational tobacco producers in the world. I decided to buy shares in the company for two reasons – a buyback program and a high 8.5% dividend yield.

The controversial nature of the tobacco industry threatens valuations, leading firms to initiate incentives such as buybacks and increased dividends. The trade-off is a subdued share price in exchange for more profitable dividend returns.

Imperial’s most recent earnings reported an impressive £3.4bn in operating profit, representing an increase of 26% from the previous year. Subsequently, analysts forecast an average 16% price rise in the coming 12 months.

However, despite strong financials, shares are down 5.5% this year. The weakened performance has prompted IMB to initiate a £1.1bn buyback program, half of which is already done with the second half to be completed by the end of October.

Mark David Hartley owns shares in Imperial Brands.

Kraft Heinz

What it does: Kraft Heinz is a packaged foods company. Around 33% of the company’s revenues come from condiments and sauces.

By Stephen Wright. I started buying shares in Kraft Heinz (NASDAQ:KHC) for a while now. When I started, I had a specific investment thesis.

While I wasn’t expecting huge revenue increases from the company, I thought an improving balance sheet would allow it to return more money to shareholders over time. And that’s been happening.

After bringing its debt down over the last few years, the firm has now reached a point where its leverage is under control. As a result, it has begun a share buyback programme.

The market doesn’t seem too impressed – the stock hasn’t responded particularly positively. But with my initial thesis seemingly playing out, I’ve been adding to my investment.

Results from the fourth quarter of 2023 were hampered by inflation and this is a risk going forward. In my view, though, the stock looks like a bargain at today’s prices.

Stephen Wright owns shares in Kraft Heinz.

Legal & General Group

What it does: Legal & General Group is one of Europe’s largest investment managers and financial services companies.

By Royston Wild. Back in March, I bought shares in financial services colossus Legal & General Group (LSE:LGEN) for the second straight month.

I had cash to invest after selling out of veterinary care provider CVS Group on rising regulatory threats. And Legal & General shares still looked attractively priced despite recent price gains.

Today the company still looks dirt cheap. It trades on a forward price-to-earnings (P/E) ratio of 9.2 times. Furthermore, its dividend yield stands at a brilliant 8.8% dividend yield.

I was especially attracted to the company on account of its dividend prospects. Its forward yield is currently far ahead of its ten-year average of 6.9%. This reading also comfortably beats the 3.8% average for Footsie shares.

This dividend yield is also well supported by Legal & General’s cash-rich balance sheet. The company’s Solvency II capital ratio stood at an enormous 224% as of December.

These formidable financial resources could give it scope to pay above-average dividends for years to come, as well as the means to invest for future growth.

Royston Wild owns shares in Legal & General Group.

The post 6 stocks that Fools have been buying! appeared first on The Motley Fool UK.

Several energy and oilfield service mid-caps offer potential stock valuation gains along with dividend income.

But one that really captures my attention is Hunting (LSE: HTG).

The company is loosely placed in an energy mid-cap grouping, given its huge operational footprint of servicing the sector. But Hunting is neither a producer like Harbour Energy nor a contractor like Petrofac, even if it may offer engineering products to both.

In fact, a bottom-up analysis of its business plans and product suite points to a customer outreach well beyond energy industries. This bodes well for Hunting’s long-term future, and may mean there is significant growth potential from its current share price.

From the ocean bed to infinity and beyond!

For starters, the company’s three “core” business product segments — resource well construction, completion and intervention, and its Titan products suite — have plenty of established customers worldwide.

Its decades-old Oil Country Tubular Goods (OCTG) business — casing, tubing, piping and pipelines used for hydrocarbon extraction — is currently in a cyclical upswing, amid relatively higher energy prices. Company estimates point to a year-end 2023 EBITDA of $99.5m, rising to $130.6m in 2024 and $163m in 2025.

But it’s Hunting’s “medium-term growth strategy to 2030” – predicated on maintaining its “robust non-oil and gas revenue” supported by “strong energy market” takings (of the sort seen in 2023) – that makes things really interesting for me.

Its precision engineering product suite now stretches from subsea to space. That sees Hunting partner with Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin to manufacture components for their rockets just as comfortably as it does with oil and gas companies for their drilling operations.  

At its recent capital markets day in September, Hunting’s order book and tender pipeline stood at $500m and $1bn respectively. That’s a strong backdrop for the business and a glimpse of future revenues.

Steady stewardship matters

Hunting also benefits from an astute, pragmatic and hands-on CEO in Jim Johnson. In my various conversations with Johnson over the years, I have always found him enthusiastically outlining pathways for future-proofing the company he joined 35 years ago, ultimately rising to the CEO’s office in 2017.

That strategic long-term thinking is making Hunting’s products as mission critical for rockets as they are for rigs! Johnson’s steady pair of hands are also overseeing an “inexorable direction of travel” to revenue accretive emerging markets. Recent moves include expansion in the Middle East and a joint venture in India.

With Hunting literally going places, for me this dividend stock appears undervalued by around 40%. That’s based on valuing the company at £660m ($815m) or five times its projected 2025 EBITDA, versus its current market capitalisation of £480m.

Caveats do apply. An oil price slump below $70 per barrel could serve as a near-term drag. The current high interest rate climate and inflationary pressures will likely limit the potential for medium-term share price gains beyond 450p. Income seekers may not be satisfied with Hunting’s 3% dividend yield.

But overall, I see more pros than cons, and a company with a diverse product portfolio gearing up for an exciting future. Therefore, I am inclined to buy more of its shares.

The post Why FTSE 250 regular Hunting may be undervalued by 40% appeared first on The Motley Fool UK.

I’ve been digging through the numbers, and I think I’ve found two stocks that are simply too cheap at current levels. Although there are no guarantees — both companies face turnaround challenges — I reckon that buying these shares for my portfolio today could deliver big profits over the coming years.

UK share #1: US oil opportunity

The long-term future of the oil industry may be uncertain. But global oil production stands at around 100m barrels per day at the moment. About 11.3m of these daily barrels come from the US. This region is the main market for equipment provider Hunting (LSE: HTG), my first pick.

Hunting manufactures and supplies wellbore products — equipment used ‘downhole’ when oil and gas wells are being drilled and prepared for production. Demand slumped after last year’s oil price crash, but things are starting to look up.

Sales of $244m during the first half of this year were broadly in line with sales during the second half of 2020. Analysts expect revenue to rise to around $350m during the second half of 2021.

Although Hunting reported an operating loss of $23m for the first half of this year, the interim dividend was increased. This suggests to me that management are confident of a continued recovery.

3 reasons why I’d buy

There are other oil and gas equipment providers out there hoping for a recovery. So why have I chosen Hunting? There are three reasons.

The first is that this business has a very solid balance sheet, but is trading below its net asset value. Hunting’s latest balance sheet shows net assets of £670m, or around 406p per share. This compares to a current share price of 209p.

That seems cheap to me, especially as the company ended the first half of the year with a net cash position of around $67m. I reckon this valuation provides a decent margin of safety if trading remains tough.

Another reason why I like Hunting is that it designs and manufactures its products, so owns the intellectual property. This is also a valuable asset.

Finally, I think there’s a catalyst in sight for this UK share to go higher. Hunting is planning to start listing its shares on the US market as well later this year. Most of the company’s revenue comes from North America, and most of its rivals are listed on the US market. This move will open Hunting stock up to a new pool of US investors. I think this could help the stock re-rate to a higher valuation.

Admittedly, Hunting still has some problems. A rebound in oil and gas drilling activity is not guaranteed. Hunting is expected to report a $15m loss in 2021, before returning to profitability in 2022. Even then, broker forecasts for a profit of $18m mean that Hunting shares already trade on 25 times earnings.

We have to look at 2023 before forecasts suggest Hunting’s profits will justify its net asset value. However, I’m not too concerned about this. Value stocks often look ugly when they’re cheap — I’d be happy to buy Hunting today.

UK share #2: a cheap property stock that could yield 6%+

As a general rule, I only buy property stocks when they’re trading at a discount to their net asset value. The reason for this is simple enough.

If a company that owns property is trading above the book value of its assets, then any further share price growth is likely to depend on rising property prices. Although this happens — a lot, recently — I don’t like to bet on a rising property market when I’m investing.

One property stock that’s caught my eye recently is urban regeneration specialist U and I Group (LSE: UAI). This £100m small cap specialises in creating mixed-use developments in London, Manchester, and Dublin. U+I shares currently trade at a 50% discount to their book value, as the group is emerging from a difficult period.

However, while the dividend yield this year is expected to be a modest 2.4%, broker forecasts suggest the yield on this UK share could rise to 6.9% in 2022/23, as profits start to recover.

U+I’s turnaround is in the hands of chief executive Richard Upton. Upton was the CEO and founder of Cathedral Group, which U+I acquired in 2014. He worked his way up through the ranks at U+I and took the top job in January 2021.

Refreshingly, Upton still seems to have a founder’s confidence in his company. Unlike many chief executives, he has been a regular buyer of U+I shares in recent years. Upton now owns 3.4% of U+I, giving him a holding that’s worth about £3.5m. In my view, Upton’s sizeable investment should mean that his interests are well aligned with those of private investors.

U+I: a bumpy road?

As I write, U+I shares are trading at around 82p. That’s a 50% discount to the company’s March 2021 net asset value of 163p per share.

I reckon this could be a bargain. But it’s certainly not a sure thing. To close the valuation gap and bring U+I’s share price closer to book value, Upton will have to prove that he can find and deliver new projects successfully. He’ll also have to show that he can do this profitably enough to justify a higher valuation.

U+I has already faced one unexpected setback this year. In June, the company was refused planning permission for a proposed project on the Albert Embarkment in Lambeth, London. This project is a joint venture with the London Fire Brigade and was expected to have a development value of £500m.

The company may yet find a solution and gain planning approval. But U+I shares have fallen by 15% since this news became public. U+I is quite a small business and doesn’t have too many other big projects on the back burner. If this project fails to go ahead, profits in future years could be lower than expected.

Despite this risk, I think U+I shares offer an attractive balance of risk and reward at current levels. I’d be happy to buy and hold this UK share as part of a diversified portfolio over the next few years.

The post 2 UK shares to buy now at massive discounts appeared first on The Motley Fool UK.

Caspian is plummeting after announcing a hefty pre-tax loss for 2020 thanks to a $2.6m impairment charge. Full-year losses clocked in at $1.7m, the oil producer swinging from a profit of $941,000 the year before.

This offset an 18% year-on-year revenues improvement in 2020, Caspian said. Income jumped to $14.3m as production increased almost 8% from 2019 levels to 545,667 barrels. Higher output at Caspian’s flagship MJF structure helped to offset the loss of its South Yelemes structure, which has been shuttered since May due to “a slow moving licence upgrade application.”

Finally, Caspian said it had cash of just $300,000 on its books as of December, down from $4.1m a year earlier. As a consequence it warned investors that “the financial outlook has improved when compared to the position 12 months ago but not yet to the point where the material uncertainty in respect of going concern… has fully receded”.

Hunting also dives

Hunting’s (LSE: HTG) share price has also slumped on Tuesday. At 238p per share the engineering stock’s 3% dip is less marked than the drop endured by Caspian Sunrise today. Though the company had dipped to its cheapest since early February at around 217p earlier.

Investors headed for the exits after Hunting predicted a “modest loss” for the first half of 2021. It said that “Hunting Titan and the group’s onshore businesses have traded ahead of expectations” in the six months to June. But it added that “this has been more than offset by a lower performance from Hunting’s offshore and international businesses”.

As a consequence, the business — which manufactures tools to help oil companies extract the commodity — thinks that full-year earnings before interest, tax, depreciation and amortisation (EBITDA) will fall short of expectations. Hunting added, however, that earnings should beat the $26.1m result punched in 2020.

UK share tips imminent recovery

Hunting said that “while there has been an increasing onshore rig count across North America, operators continue to demonstrate strong capital discipline”. This led to drilling expenditures “remaining subdued” in H1. And the pricing environment was deflationary across all product lines in the oilfield services sector due to market oversupply.

Still, Hunting believes trading will begin to improve in the second half of 2021. It says that improved oil prices per barrel should bolster capital expenditure levels among its clients and mean better demand for its services.

“With the oil price firmly above $70 per barrel, along with the production discipline seen within the OPEC group and the improving global economic outlook, management expect a gradual improvement in hydrocarbon demand in the short-to-medium term,” it noted.

The post Here’s why UK shares Hunting and Caspian Sunrise are sinking! appeared first on The Motley Fool UK.

Hunting’s financial outlook

Hunting manufactures hydrocarbon extraction tools. It provides the world’s leading oil and gas companies with premium products and associated services for sale or hire. It’s a global enterprise based in multiple locations.

In the past three months, the Hunting share price has risen 34%. Looking at the wider picture, it’s down 18% in five years. But at around £2.62 a share, it remains a far cry from its 2018 peak of £9.30 a share. So, at today’s price, with Covid-19 still hampering progress, does Hunting look like a good investment for me for the next five years?

Hunting has a £437m market cap, earnings per share are negative, and it offers shareholders a 2.4% dividend yield.

For Hunting, FY20 revenue came in at $626m, which was down from $960m in 2019. Earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 81% from $139.7m in 2019 to $26.1m in 2020. Despite this, the group still felt confident enough to declare a final dividend.

What’s the long-term outlook for Hunting?

Hunting relies on industry capital expenditure to survive and with clients cutting their capex across the board, this led it to lose orders. But despite the dire backdrop, the company managed to show resilience. Its strong balance sheet shows it’s in better shape than some of its competitors and it ruthlessly cut jobs and distribution centres to make that happen.

In February 2020, Hunting bought Enpro Subsea, this helped it to increase its revenue from subsea products by 57% in FY20. Then last month, it invested $2.5m in drilling analytics company Well Data Labs. This gives the company a foothold in big data and analytics in drilling, which I think is a wise move in this tech-driven world.

The company has also been diversifying slightly with advanced manufacturing orders in aviation, space, defence, military, medical and geothermal. Elon Musk’s Space X and Jeff Bezos’s Blue Horizon have placed orders in the past year for aerospace related high-precision products. While its non-oil and gas revenue only account for 6% overall, these are big clients that could open doors.

Risk vs reward

Raw materials prices, such as steel, are rising, which means Hunting has to increase its prices to keep pace. Inflation is a concern if the companies are not bringing in enough revenue to cover the rising prices. However, the success of this industry correlates tightly with the price of oil, so if it strengthens, Hunting should thrive.

As I remain bullish on the long-term outlook for the oil industry, I’d happily buy shares in Hunting and hold for the next five years. It obviously comes with cyclical and external risks, and recovery could well be slow initially. But the world still needs oil, and Hunting is a company offering quality products in drilling and other vital sectors of the market. I also like the fact it’s happy to conduct share buybacks and protect the dividend, making shareholders a priority.

The post The Hunting share price is fluctuating. Is this a good long-term investment? appeared first on The Motley Fool UK.

Some companies in the oil industry have been hit even harder than Shell. For instance, oil services firm Hunting (LSE: HTG). Its share price plummeted so rapidly it was demoted from the FTSE 250 to the small-cap index in March. Could this be another candidate for a spectacular recovery?

Shell share price vs Hunting share price

Looking at the year-to-date performance, the Shell share price is down 54%. Meanwhile, Hunting’s shares have dropped a dizzying 64% from over £4 to not much above £1.50.

Of course, the price of oil has also slumped in the grip of the coronavirus pandemic. Having started the year at over $60 a barrel, WTI crude is currently around the $40 mark.

Furthermore, the near-term outlook isn’t great. Both the IEA and OPEC have recently downgraded their demand forecasts for 2020. The former expects a contraction of 8.4m barrels a day from last year, and the latter 9.5m.

The IEA also said it sees a “treacherous” path ahead, and OPEC suggested risks would remain “elevated and skewed to the downside” for the first half of 2021.

Creditable performances in unprecedented times

Shell posted adjusted earnings of $638m during this year’s extremely challenging April-June quarter (down 82% on the same period last year). Cash flow was also positive.

However, the company reported a statutory loss of over $18bn. This was due to non-cash impairment charges on revised assumptions about the outlook for the oil price and refining margins.

It was a similar story over at Hunting. A statutory loss due to hefty impairment charges, but the company telling us it traded at or near to break-even at the EBITDA level through the April-June quarter.

As such, I’d say both businesses performed creditably in a period that saw an unprecedented drop in global oil demand.

The Hunting and Shell share prices are cheap

It could take some time for the oil market to rebalance after the huge stocks build-up earlier this year. However, in the medium term, I can see the oil price migrating back to the pre-pandemic $60-a-barrel level. And a recovery in the Shell and Hunting share prices.

The market’s currently valuing Shell at 6.5 times its pre-pandemic earnings. It also offers a prospective 4.8% dividend yield, even after this year’s rebasing of the payout. Meanwhile, Hunting is trading at just 4.5 times its pre-pandemic earnings with a prospective yield of 2.5%.

I’d be happy to buy Shell and Hunting today for a medium-term recovery in the oil price. I reckon Shell’s shares could get back to £20, and Hunting’s to £4.

What of the long term?

Looking further ahead — by which I mean decades — the world is transitioning away from hydrocarbons towards cleaner fuels.

My colleague Rupert Hargreaves has recently written about Shell’s plans to become a global electricity supplier. He believes the shares could be a good bet for the long term.

I think a case can also be made for long-term ownership of Hunting’s shares. This is because it’s successfully metamorphosed a number of times since it was founded in 1870.

The post Will Shell’s share price ever go back up to £20? appeared first on The Motley Fool UK.

It’s not just the crude producers that need to worry, of course. Suppliers of key oilfield services like Hunting (LSE: HTG) also find themselves in huge peril. But don’t just take my word for it: a report just released by the International Energy Agency reveals the weak profits picture for these engineers.

The body’s latest World Energy Investment report that’s just been released suggests that capex spend across the oil and gas sector will plunge 32% in 2020 to just above $250bn. Lockdown measures have hampered investment activity, sure. But this is not the main reason why spending is likely to tank, it says. Instead, “planned 2020 investments in upstream oil and gas have been slashed under pressure from the collapse in oil prices and demand”.

Under pressure

It’s a phenomenon that’s already delivering a body blow to small-cap Hunting and its peers. In mid-April, it advised that “the impact of the oil price decline has affected demand within the Group’s segments focused on US onshore completions since the end of March 2020.”

But this was not all. It added that “other segments are likely to see declines towards the end of quarter two, given that orders are continuing to be completed across all of [our] operating regions for a variety of offshore and international projects.” With work drying up, Hunting yanked its full-year guidance and pulled the dividend at the same time.

An oil play to avoid?

Glass-half-full investors might think that this is as bad as things will get for Hunting. Energy demand is likely to pick up again as lockdown measures are eased. And this should consequently drive oil prices and profits amongst crude producers higher again.

But I’m not convinced that values of the liquid commodity will continue to recover. Whilst off-take is indeed improving, supplies remain quite abundant and keep topping expectations. Latest data from the American Petroleum Institute showed US stockpiles up by 8.7m barrels when a 1.9m-barrel reduction had been tipped.

Investors need to consider how far oil prices can continue their recent recovery, given that the world is on the cusp of a painful (and possibly prolonged) economic downturn. The profits outlook for Hunting remains pretty murky not just for the near term.

City forecasts seem to be in agreement. They suggest that the small-cap will follow a 77% fall in annual profits in 2020 with a 27% drop next year. Investors need to be concerned about the state of Hunting’s balance sheet as well. In March it had just $22.3m of net cash on its books. This was down almost $100m from a year earlier.

The risks to Hunting are considerable. And yet it trades on a fatty forward P/E ratio above 20 times. I find it hard to envisage any reason why investors would want to buy today. I’d avoid it like the plague.

The post Stock market crash: an oil stock I wouldn’t touch with a bargepole appeared first on The Motley Fool UK.

Well, latest data from UK Finance seems to suggest so. It said earlier this week that just one in 10 retail transactions in Britain is made using cash nowadays. And it predicts that the country will be “virtually cashless” by the middle of the 2030s.

Don’t bank on a comeback

This is a trend that mirrors changing consumer habits around the whole world. It’s a phenomenon that has unsurprisingly buried De La Rue (LSE: DLAR). The money printer’s share price has fallen around 85% over the past three years as cash usage has moved into terminal decline.

Latest results from De La Rue don’t suggest that it’ll rise like the proverbial phoenix from the flames either. Revenues from its Currency unit tanked by almost a third year-on-year between April and September as volumes and prices of its banknotes slipped.

So City analysts expect the FTSE 250 firm’s earnings to plummet again in the current fiscal year (to March 2020). A 76% bottom-line drop is currently being predicted. If  proven correct it won’t be the first time annual profits have tanked in recent years. But it could be one of the last, the business saying that there is “significant doubt” over its ability to continue trading due to its high debt levels just three months ago.

So forget about De La Rue’s low forward price-to-earnings (or P/E) ratio of 9.8 times. Not even these levels of cheapness are enough to tempt me to invest today.

Hunting’s headaches

For bargain hunters, buying shares in Hunting (LSE: HTG) might seem a more sensible option. This is a company that also trades on a rock-bottom forward P/E ratio of around 10 times. And unlike De La Rue it also offers a dividend for the current year, one which creates a chubby 2.8% yield.

In my book, though, this is another share that’s loaded with an alarming amount of risk. Freshest trading details in December underlined the huge troubles at the energy services provider as North American shale activity decelerated. It said that the pace of decline is actually accelerating and particularly so in the US onshore segment.

It’s possible that the rig count will keep on falling too, what with key macroeconomic issues (like trade wars, Europe’s lurch towards recession, and Brexit) lingering on in the background. Moreover, the recent coronavirus outbreak threatens to keep oil prices under pressure as well.

A 3% annual earnings drop in 2020 is currently forecast for Hunting by City analysts. I wouldn’t be surprised if its bottom-line troubles extend beyond the current year though, given the alarming shrinkage in the company’s highly-competitive marketplace. This is another share I would say is to be avoided all costs.

The post Sound the alarm! Two UK shares I think you need to avoid at ALL costs appeared first on The Motley Fool UK.