Are BHP Billiton plc, Rio Tinto plc And John Wood Group PLC Set To Soar?

Should you buy or sell these 3 resources companies? BHP Billiton plc (LON: BLT), Rio Tinto plc (LON: RIO) and John Wood Group PLC (LON: WG).

| 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.

Shares in Wood Group (LSE: WG) were given a boost today, with the resources support services company announcing the acquisition of Ingenious Inc. It’s a US-based proprietary software and consulting services business that Wood Group states will build on and diversify its capabilities within the automation and control space. Wood Group will also be able to leverage the strength Ingenious has in the operator training simulator market to enhance its control system simulators, training tools and services.

With shares in Wood Group rising by 2%, the market seems to be upbeat regarding today’s news. And while the wider oil and gas sector has performed relatively poorly in recent months, shares in Wood Group have risen by 9% in the last three months. Despite this, they still trade on an appealing valuation, with Wood Group having a price-to-earnings (P/E) ratio of just 13.4. This indicates that its shares could be due for an upward rerating and with earnings growth of 5% forecast for next year, they could continue their run of the last few months over the medium term.

Priced to buy?

Also rising strongly in the last three months have been shares in iron ore-focused miner Rio Tinto (LSE: RIO). It has soared by 12% during the period as the outlook for the iron ore price has improved slightly. And with the company expected to return to earnings growth next year, now could be a good time to buy a slice of it.

In fact, Rio Tinto is expected to record a rise in net profit of 39% in 2017 and this puts its shares on a price-to-earnings-growth (PEG) ratio of just 0.5. This indicates that further capital gains could lie ahead, with the company’s recent strategy shift towards a more affordable dividend apparently having been embraced by the market. And with Rio Tinto due to have a new CEO following Sam Walsh’s decision to retire, a refreshed strategy could boost the company’s financial performance yet further.

Profits boost

Meanwhile, shares in BHP Billiton (LSE: BLT) have also risen in the last three months, with them being up by 13%. This is at least partly due to an improved outlook for commodity prices, but is also because BHP Billiton’s current strategy appears to be having a positive effect on its financial performance. Initiatives such as splitting-off core and non-core operations to generate efficiencies, as well as cost-cutting, are set to aid the company in posting a rise in its pre-tax profit from £1.1bn in the current year to £3.2bn next year.

The impact of such a rapid rise in earnings could be very positive on the company’s share price. While it may not allow BHP Billiton to escape dividend cuts, it should mean that the company’s financial health improves and this could lead to a brighter outlook for shareholder payouts in the long run. As such, now seems to be an opportune moment to buy a slice of the business.

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.

Peter Stephens owns shares of BHP Billiton and Rio Tinto. The Motley Fool UK has recommended Rio Tinto. 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

Young Caucasian man making doubtful face at camera
Investing Articles

Surprise! This monopoly stock has taken over my Stocks and Shares ISA (again)

Our writer has a (nice) dilemma in his Stocks and Shares ISA portfolio after one incredible growth stock rocketed higher…

Read more »

Investing Articles

10.5% yield – but could the abrdn share price get even cheaper?

Christopher Ruane sees some things to like about the current abrdn share price. But will that be enough to overcome…

Read more »

Investing Articles

£9,000 to invest? These 3 high-yield shares could deliver a £657 annual passive income

The high yields on these dividend shares sail sit well above the FTSE 100 average of 3.6%. Here's why I…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

I’ve got £2k and I’m on the hunt for cheap shares to buy in December

Harvey Jones finally has some cash in his trading account and is hunting for cheap shares to buy next month.…

Read more »

Investing Articles

Down 25% with a 4.32% yield and P/E of 8.6! Is this my best second income stock or worst?

Harvey Jones bought GSK shares hoping to bag a solid second income stream while nailing down steady share price growth…

Read more »

Investing Articles

Here’s how the Legal & General dividend yield could ultimately hit 15%!

The Legal & General dividend yield is already among the best of any FTSE 100 share. Christopher Ruane explores some…

Read more »

Investing Articles

Is December a good time for me to buy UK shares?

This writer is weighing up which shares to buy for his portfolio next month, and one household name from the…

Read more »

Investing Articles

Is it time to dump my Lloyds shares and never look back?

Harvey Jones was chuffed with his Lloyds shares but recent events have made him rethink his entire decision to go…

Read more »