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Reuters: Jupiter’s Seager sees ‘deep value’ in Shell

Mon Jan 22, 2007 8:53 AM GMT
By Laurence Fletcher

LONDON (Reuters) – Justin Seager, a fund manager at Jupiter Asset Management, has bought a position in Royal Dutch Shell because the poor performance of its shares means it is now attractively valued.

“The big ones (oil stocks) have been awful. Now they are sufficiently distressed that it’s no longer appropriate to have none. We’ve bought the one that is more cheaply valued,” Seager told Reuters in an interview.

Seager said Royal Dutch Shell now accounts for 6 percent of his Jupiter UK Growth Exempt fund. This portfolio has recently been restructured as a fund taking the best stock ideas from Jupiter’s UK equity team and will be renamed the UK Alpha fund.

Over the past year Royal Dutch Shell has underperformed the FTSE 100 < .FTSE> index by 17.1 percent, while BP has underperformed by 27.3 percent.

According to Reuters estimates Royal Dutch Shell is on a price/earnings ratio of 8.8 times 2006 forecast earnings while BP is on 10.1 times.

“Our view is that the oil sector is quite distressed. It (Shell) is … on a very attractive multiple of core assets. We tend to look for a catalyst, and in the case of Shell there isn’t one, so it’s a proper deep value-type investment.

“It (the investment) is based on the idea the oil price will stay above $40 in the long term. Provided you take that view, the p/e (price/earnings ratio) is low, the cashflow is strong and the asset-backing is strong.”

Since the end of last year U.S. crude, which on Friday was trading just above $50, has fallen by 17 percent and is around 35 percent below last year’s record high of $78.40.

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