graraps Posted June 14, 2007 Report Share Posted June 14, 2007 Hello all! Inspired by my first post , and the fact that my CFDs shot upwards today, got closed at midday (to reclaim half of last week's losses and save myself worrying about any triple-witching tomorrow) then climbed up even further, I'd like your views on European "national champion" oil companies. I find it a bit strange that people spend a lot of time talking about the likes of obscure Canadian drillers (who may have great upside if they make a major discovery and accordingly big risks if it doesn't materialise) yet (with the exception of BP) seem to have no interest in companies who are in both oil and gas, in many parts of the world (with the resultant diversification in risks and rewards), upstream and downstream, carry a massive amount of brand equity as well as the possibility of making a lot of money outside of their core activities (things like logistics, retail or even real estate). Some are even investing substantial amounts in renewables and so on.... Moreover, they are denominated in reasonably good currencies (well, perhaps the Yuan's better but the Euro and other European currencies seem decent compared to sterling or the US dollar), seem to pay reasonable dividends and, at least last time I checked (which was before today's substantial gains), are available at very attractive valuations (P/E under 12). Apart from the fact that they are too big to grow much bigger (especially considering the long-term decline of oil and gas reserves) is there a catch and/or some important point(s) that I've missed? Would also appreciate if anyone could have a go at their charts, too. I am not experienced enough to "naturally" read them and I'm a HR person by training (please stop booing!) and my theoretical knowledge is based solely on a bit of Quantitative Analysis for dissertations etc and the Economics 1 second-year module. Link to comment Share on other sites More sharing options...
No6 Posted June 14, 2007 Report Share Posted June 14, 2007 I think part of it may be due to Europe be looked on as backward in its business practices compared to countries like the UK, USA and the far east. It's a generalisation of course, but people do get set ideas and then there is the EEC, which to most Brits is hardly a popular concept. Still, it would be interesting to know more about the better euro companies on offer. I do have an investment in a european smaller companies trust and it has done well, especially in the last year or two. Also on CFD's, maybe you can start a thread on why you use them, the advantages, etc? Below is an article today from Money Morning - nice timing. George Orwell once said that “to see what is in front of your nose needs a constant struggle”. He probably wasn’t thinking about finance, but this applies to many UK investors: amid all the excitement about emerging markets, they have neglected opportunities closer to home. Take Europe. Continental markets have raced ahead of their UK and US counterparts over the past few years, and the region is still well worth a look... Often dismissed as a hopelessly sclerotic has-been, the continental economy has sprung back to life. In fact, “it’s giving a good impression of being back as a global economic powerhouse”, as Ralph Atkins notes in the FT. GDP growth hit 3.1% in the first quarter. A buoyant global economy has boosted exports–shipments to Asia and Eastern Europe have risen especially quickly–and business investment is expanding at the fastest pace in a decade. In Germany, which accounts for about a third of the eurozone, exports and business investment now look set to pass the baton to consumption, thus keeping growth going. Germany’s notoriously stingy consumers increased spending by the largest amount in four months in April, suggesting that they have shaken off a VAT hike early this year. The European Commission expects private consumption to be the main driver of German growth in 2008. This year, German GDP growth should reach 2.8%, according to the OECD. Unemployment at a six-year low and an uptick in consumer confidence bode well. And as Edward Hadas notes on Breakingviews.com, German consumers’ – and companies’ – relatively low debts leave the country better placed to weather rising global interest rates than its Anglo-Saxon rivals. The eurozone’s strong performance isn’t merely a cyclical upswing; there have been structural improvements too. Changes to the benefits system in Germany, for instance, have pushed people into the workforce. But the key point about structural improvements in Europe over the last few years is that companies haven’t been sitting around waiting for politicians to push through reforms. “Inaction by governments has forced companies to take matters into their own hands”, says Bedlam Asset Management. It’s just as well. While there has been some government action in Germany, Barclays Capital’s Thorsten Polleit, for one, has “given up waiting for a consistent reform programme”, as Wirtschaftswoche noted recently. The government did manage to push through a corporation tax cut, but there has been scant sign of further labour market deregulation. And recently the coalition has had trouble agreeing a smoking ban. So corporations have outsourced, restructured drastically, and negotiated flexible working agreements and lower wage increases with trade unions. DaimlerChrysler managed to cut head office staff by a fifth. Even Deutsche Telekom has adopted a “perform better or die” attitude, notes Bedlam. If a “market Neanderthal” like Deutsche Telekom can change, “the rest of Europe will too”. The restructuring trend has been particularly pronounced in Germany, but Sweden is also notable for restructuring success stories, says Bedlam. Corporate revamps, along with the strong global economy, have boosted competitiveness and given earnings a hefty fillip. German unit labour costs have actually dropped by 10% over the past decade (while they have risen by the same amount in Britain). Carmaker VW reported an earnings increase of over 100% in the first quarter. Overall European profits are 60% higher than in 2000, and return on equity has doubled. This year, earnings have been revised upwards consistently (while in America earnings momentum has fallen) and are set to grow by another 7-8%. Germany is steaming ahead: German companies in the pan-European DJ Stoxx 600 index are now expected to earn 9.3% more this year. Meanwhile, valuations remain reasonable, with the Stoxx 600 on a PE of below 14. Germany is still among the cheaper eurozone markets, with the rerating process amid Germany’s improved structural performance far from over, according to Alain Bokobza of Societe General. While Germany looks promising, so does France under Sarkozy, reckons Rob Burnett of Neptune Investment Management. His attempt to introduce long-awaited reforms such as dismantling the 35-hour week may cause unrest, but it would give French productivity a considerable boost. Given all this, it’s no wonder Burnett sees “compelling opportunities” across the channel. Link to comment Share on other sites More sharing options...
alexays Posted June 14, 2007 Report Share Posted June 14, 2007 Hello all!Inspired by my first post , and the fact that my CFDs shot upwards today, got closed at midday (to reclaim half of last week's losses and save myself worrying about any triple-witching tomorrow) then climbed up even further, I'd like your views on European "national champion" oil companies. I find it a bit strange that people spend a lot of time talking about the likes of obscure Canadian drillers (who may have great upside if they make a major discovery and accordingly big risks if it doesn't materialise) yet (with the exception of BP) seem to have no interest in companies who are in both oil and gas, in many parts of the world (with the resultant diversification in risks and rewards), upstream and downstream, carry a massive amount of brand equity as well as the possibility of making a lot of money outside of their core activities (things like logistics, retail or even real estate). Some are even investing substantial amounts in renewables and so on.... The thing why we all get excited about smaller shares is the potential for huge upside is greater in a short period of time. I have some BP and have also had some Shell in the past, but you are never going to get much excitement there. Whereas if you look at Soco for instance..... As most people here are English it makes less sense to hold overseas shares when you can put your UK ones in an ISA. Link to comment Share on other sites More sharing options...
graraps Posted June 14, 2007 Author Report Share Posted June 14, 2007 The thing why we all get excited about smaller shares is the potential for huge upside is greater in a short period of time. I have some BP and have also had some Shell in the past, but you are never going to get much excitement there. Whereas if you look at Soco for instance..... As most people here are English it makes less sense to hold overseas shares when you can put your UK ones in an ISA. Clearly I am thinking of them for long-term plays in an energy-heavy portfolio...I do understand the attraction of small companies for medium-term trading, though I think they're far too risky to be worth considering for anything more than 10% (or 15% if you REALLY know what you're doing) in a portfolio, whereas I wouldn't have any issues putting 25% of my money on, say, Total alone (steady growth, lots of projects worldwide, works both with the "good guys" and "bad guys" and pays a reliable dividend each and every year). And don't forget that their massive liquidity translates into a fair bit of channel trading opportunities...I have made around €5000 on a capital of just €40000 only from trading Total over 2 months...the share price has only moved about 1.8% all in all! And the worst that can happen is share price falls, you get stuck with the stock and keep it for a bit longer... and you still get best part of 5% divi on your money... Soco sounds good for perhaps a few months and I've just agreed to take part in a semi-private placement for a new AIM entrant (nothing to do with the energy sector BTW), but for anything going further than 2007, what good is a long-term holding in a massively overpriced currency? The casino has never sounded more attractive (they only earn 1 in 37 after all!). I know of money supply issues in the Eurozone, too, but don't forget they need to print a bit more because they've started exporting it as a reserve currency so IMHO the real effect is nowhere near as pronounced. I personally hate ISAs because they are inflexible and totally at the whim of politicians...whereas, once I buy my shares (oh and most EU markets have no stamp duty or if they have it's something nominal like 0.015%), nobody can touch them and if I needed to sell I could always find a way to migrate or even "migrate" if the money was right. Link to comment Share on other sites More sharing options...
graraps Posted June 15, 2007 Author Report Share Posted June 15, 2007 Also on CFD's, maybe you can start a thread on why you use them, the advantages, etc? Ah, CFDs. The investor's mortgage! The basic premise is that you can get some serious leverage, and that you have to pay interest for the privilege. Personally I don't utilise much of the former and just use them because my broker lets me use them for stocks anywhere without any currency exchange costs. So I've recently been able to purchase Statoil and sell it on for a quick profit of about 1.2%. If it were shares, I'd have to pay 0.5% each way in exchange fees (eur-> nok -> eur), leaving me with an enviable (not) gain of 0.2%... I imagine every broker/investment bank will have their own T&Cs for CFDs (on things like currency exchange or interest policy), and I have experience of dealing with exactly ONE, so I'm probably not the best person to talk about them, especially since I am nowhere near fanatical about them... Link to comment Share on other sites More sharing options...
drbubb Posted June 15, 2007 Report Share Posted June 15, 2007 Good thread - but we need some charts, as we ponder these questions i will start a thread elsewhere, where we can get self-updating charts link: (to follow) Link to comment Share on other sites More sharing options...
graraps Posted June 15, 2007 Author Report Share Posted June 15, 2007 bloody hell...they're all continuing the climb today! please can we have a 3% fall by the end of the day so that I can buy again on Monday? Link to comment Share on other sites More sharing options...
drbubb Posted June 15, 2007 Report Share Posted June 15, 2007 what should we be charting? on Statoil, Eni, Total, PKN, Others? symbols? i will look for a us quote where possible Link to comment Share on other sites More sharing options...
graraps Posted June 15, 2007 Author Report Share Posted June 15, 2007 what should we be charting?on Statoil, Eni, Total, PKN, Others? symbols? i will look for a us quote where possible A large part of the point about buying these stocks is to avoid exposure to the dollar...Some of them have dollar ADRs, not sure how these work (i.e. do they effectively move with the currency markets?). The home-market tickers are ENI.MI STL.OL FP.PA (Total) PKN:XWAR MORr.AT (Motor Oil Hellas- they've got a fantastic long-term deal with Aramco, who also own part of the firm! But trading the Greek market can be impractical- CFDs expensive and many brokers not offering the opportunity at all) Apart from my broker's software, I use Total's website, local stockmarket information sites in Poland and Greece (you don't have to speak the language...just do a bit of tinkering and a chart is a chart is a chart!) and yahoo! finance for tracking them... This list is not exhaustive!! There are other companies, too, and I 'd love info on them if anyone has. However, I'm pretty sure I have looked at the Spanish ones (Cepsa, Campsa and Repsol) and found them overpriced; that'd be like pretty much every asset in the entire country then... Link to comment Share on other sites More sharing options...
graraps Posted June 15, 2007 Author Report Share Posted June 15, 2007 duplicate post... Link to comment Share on other sites More sharing options...
No6 Posted June 16, 2007 Report Share Posted June 16, 2007 Clearly I am thinking of them for long-term plays in an energy-heavy portfolio...I do understand the attraction of small companies for medium-term trading, though I think they're far too risky to be worth considering for anything more than 10% (or 15% if you REALLY know what you're doing) in a portfolio, whereas I wouldn't have any issues putting 25% of my money on, say, Total alone (steady growth, lots of projects worldwide, works both with the "good guys" and "bad guys" and pays a reliable dividend each and every year).And don't forget that their massive liquidity translates into a fair bit of channel trading opportunities...I have made around €5000 on a capital of just €40000 only from trading Total over 2 months...the share price has only moved about 1.8% all in all! And the worst that can happen is share price falls, you get stuck with the stock and keep it for a bit longer... and you still get best part of 5% divi on your money... I think trading the blue chips is a good idea because for the most part you are protected by less volatility and unless something goes drastically wrong, like a Marconi, you have more protection than on the smaller companies, which while exciting can also wipe you out if it goes in the wrong direction. Oversold and overbought indicators often give pretty good signals as to when to get in and out. It appeals for swing and position trading over longer periods of time. Link to comment Share on other sites More sharing options...
DontPanic Posted June 17, 2007 Report Share Posted June 17, 2007 As well as oil majors you could also consider British Energy BGY.L which has a low PE. The sales price of electricity is linked to the oil price whilst the nuclear production cost is constant. There is a good correlation between the BGY share price and oil but you also have to take into account when nuclear plants come online or are disconnected from the grid (which is the reason for the jumps). Its also a play on new nuclear build in the UK. Link to comment Share on other sites More sharing options...
graraps Posted June 18, 2007 Author Report Share Posted June 18, 2007 Eni had a serious dip today, on news that Nigerian guerillas seized a flow station. Worth keeping an eye on, any further fall and I'm back in!! Link to comment Share on other sites More sharing options...
graraps Posted June 19, 2007 Author Report Share Posted June 19, 2007 Eni back up today argh... PKN slightly down tho Link to comment Share on other sites More sharing options...
graraps Posted June 25, 2007 Author Report Share Posted June 25, 2007 Can DrBubb or anyone else for that matter give the charts a go? Link to comment Share on other sites More sharing options...
graraps Posted June 26, 2007 Author Report Share Posted June 26, 2007 Eni tanked today. I'm ready to jump back in. Link to comment Share on other sites More sharing options...
Arn Posted July 9, 2007 Report Share Posted July 9, 2007 How have you done in the last month? I know some people heavily in Shell (via NL) who have it for generations in the family and like it for the Dividends. I popint out to them they have a few large eggs in one Oil basket but so far it was good enough for their father's generation so good enough for them. 2nd Question what other good dividend earners would someone suggest? Arn Link to comment Share on other sites More sharing options...
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