Published: 03 June 2007
Now could be the time to buy shares in oil companies. According to stockbroker Charles Stanley, the oil and gas sector listed on the FTSE has underperformed the rest of the market for most of the past five years.
On a price-earnings basis, BP and Shell are trading at a 20 per cent discount to other non-oil companies. Shell, for example, has a dividend yield of 4.2 per cent, compared to 3 per cent on the FTSE. This is even though prices for the black stuff have risen from $24 per barrel in 2002 to some $70 this year.
The Charles Stanley report says that oil prices are likely to remain high because global production is constrained. “At this level, and with the prospect of long-term issues conspiring to keep prices high, oil and gas shares may yet be rerated.”
Further reading: Read ‘The Last Oil Shock’ by David Strahan (published by John Murray)
http://news.independent.co.uk/business/news/article2607310.ece
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