Opinions
Don Vialoux
Royal Dutch Shell PLC (B)
RDS.B-N
COMMENT
Jan 20, 2017
Stock price when the opinion was issued
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Pays over a 7% yield. All oil stocks have been hammered, but it made a good deal when it bought British Gas five years ago. They're now an LNG company more than oil. Gas is the cleanest carbon fuel. Last Friday, oil stocks bottomed, though the stocks are gushing cash. Oil will stick around for another 15-20 years. So, these stocks are worth looking at unless you don't care for carbon.
Fell to book value, but jumped on Pfizer announcement. Intrinsic value is 60% higher than current value. Fairly indifferent balance sheet. If it can break above $31, could easily go as high as $42. No yield.
The ESG movement is affecting stocks like RDS. Was pulled into the courts by activists. Many large companies have on going lawsuits and are shared in quarterly reports. It's not too big of an issue. They are transitioning into a renewable company with Hydrogen and wind farms. Big oil will be a natural beneficiaries of renewables. The dividend is sustainable and growth outlook is good. Oil is also a recovery trade.
For refiners, seasonality usually starts around the middle of February, and goes through to May. We are now at the beginning for the period of seasonal strength. The chart shows a reverse head and shoulders pattern, one of the best typical patterns you want to see on a security. It works by taking the quantity of the pattern, and you can project what the target is going to be on the upside, between now and probably the beginning of May.