Can SkyePharma PLC (+78%), Cairn Energy PLC (+63%) And Vedanta Resources plc (+56%) Keep On Climbing?

Are SkyePharma PLC (LON: SKP), Cairn Energy PLC (LON: CNE) And Vedanta Resources plc (LON: VED) set for big wins?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Pharmaceuticals, oil and gas exploration, and mining — quite a heady combination these days, but all three shares have been rising strongly of late and could have much further to go.

Look at SkyePharma (LSE: SKP). Its shares have climbed by 78% from their 52-week low in August 2015, to 457p — and if that’s not enough for you, over the past five years they’ve soared by a massive 990%! But, can it keep going?

I’d say there’s a very good possibility that it can. SkyePharma, once a lossmaking blue-sky possibility, has crossed the line into profitability and earnings per share (EPS) have been swelling nicely. In fact, though there’s a fall in EPS forecast for this year, the subsequent growth pencilled-in for 2017 would put the shares on a P/E of a little over 15 — and I reckon that’s very attractive for a growth candidate.

What’s more, SkyePharma’s speciality is in developing drug delivery technology rather than the drugs themselves — things like oral, topical, inhalable and injectable delivery systems. And to me that makes the firm look like a lower risk “picks and shovels” candidate, whose products are used by big-name drug developers including GlaxoSmithKline, Novartis, Roche and others.

Oil strength

The rising price of oil, which is oscillating around the $40 level, has helped boost Cairn Energy (LSE: CNE) shares by 63% to 208p since their low of 20 January. Full-year results released on 15 March contributed too. Chief executive Simon Thomson said of the firm’s offshore Senegal prospects that the results have confirmed “the scale and extent of the significant resource base in this world class asset“.

A risk with Cairn Energy is that it’s still at the cash-burn stage and there are no profits within the forecast horizon yet. But at 31 December there was a tidy $603m net cash on the books, and the company still has undrawn lending facilities and letters of credit that should add around another $500m to its available cash. Cairn, then, isn’t going to be hit by the kind of debt squeeze in the near future that some of its rivals will face.

With some impressive assets under development and a positive brokers’ stance, Cairn looks promising to me.

Mining resurgence

India-focused Vedanta Resources (LSE: VED) has seen its shares drop 41% over the past 12 months as the commodities slump has continued to bite, but since a low on 18 January there has been a 56% climb to 320.5p. With the firm’s main products being copper, zinc, aluminium, lead, iron ore and petroleum, the recent recoveries in minerals and oil prices have both given the shares a leg up.

Vedanta, like the rest of the sector, isn’t out of the woods yet. With earnings having plummeted over the past few years, the company has three years of losses forecast — and its dividend, set to yield 4.5% for the year to March 2016, is surely not going to be maintained.

But the losses should be relatively small, and the long-term future is surely solid, even if analysts currently have Vedanta as a sell.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

10% dividend growth! 2 FTSE 100 stocks tipped to supercharge cash payouts

These FTSE 100 stocks have strong records of dividend growth. And they're expected to keep on delivering, as Royston Wild…

Read more »

Investing Articles

Down 17% in a month and yielding 7.39%! Is this FTSE 100 share a screaming buy for me?

When Harvey Jones bought Taylor Wimpey last year he thought this FTSE 100 share was a brilliant long-term buy-and-hold. Has…

Read more »

Investing Articles

Here’s how I’m using a £20k ISA to target £11k+ in income 30 years from now

Is it realistic to put £20k in an ISA now and earn over half that amount every year in passive…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

If I could only keep 5 UK stocks from my portfolio I’d save these

Harvey Jones is running through his portfolio of top UK stocks to see which ones he couldn't bear to do…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

I’m aiming for a million buying unexciting shares!

By investing regularly in long-established, proven and even rather dull businesses, this writer plans to aim for a million. Here's…

Read more »

Investing Articles

3 things to consider before you start investing

Our writer draws on his stock market experience to consider a few vital lessons he would use to start investing…

Read more »

Investing Articles

Will this lesser-known £28bn growth stock be joining the FTSE 100 soon?

As the powers that be plan a reorganisation of Footsie listing rules, this massive under-the-radar growth stock could find its…

Read more »

Investing Articles

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »