Lloyds

The Lloyds share price had dived 2% when these transactions were reported. But that didn’t stop a number of insiders purchasing shares via the company’s share incentive plan (SIP).” A SIP is an employee plan for companies within the UK to award equity to employees flexibly. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

Breaking down the director dealings, it seems that all but Harmeen Mehta purchased shares via Lloyds’ SIP. Within certain transactions, there are partnership shares and matching shares. The former is an invitation to buy shares via deductions from salary pre-tax and National Insurance Contributions (NIC). The latter is an add-on to when partnership shares are offered, where a company matches the number of partnership shares of up to a maximum ratio of two-to-one. Matching shares must normally be held in a trust for at least three years, and held for five to get a full tax relief.

Rolls-Royce

Rolls-Royce had a rather eventful week. Prior to reporting its Q1 2022 trading update, the firm had a slew of director dealings that were reported on Monday and Wednesday. Most notably, a number of high profile directors and executives redeemed and offloaded a large number of shares. Under any other circumstances, this would send alarm bells ringing. Nevertheless, these sales were attributed to covering tax liabilities. As such, it shows that directors are still relatively confident in the company’s future.

BP

After BP reported record profits last week, many were calling for a windfall tax on the oil giant. Such a tax would hinder future investment by the company as any profits would be heavily taxed, thus limiting its earnings potential. That being said, BP directors were unfazed. CEO and Director Bernard Looney, as well as Julia Emanuele, opted to purchase more shares under the firm’s ShareMatch UK Plan, albeit in small amounts.

The post Director dealings: Lloyds, Rolls-Royce, BP appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If I believed everything I’d read about the BP (LSE: BP) share price in recent years, I wouldn’t go anywhere near the stock.

By rights, the oil & gas giant should have been sunk by climate change and the rush into renewables. Few were convinced by chief executive Bernard Looney’s 2050 net zero strategy, or the group’s commitment to low-carbon energy and sustainability. As wind and solar got cheaper and the oil price fell, the BP share price only seemed to be heading in one direction.

Then Russia invaded Ukraine, and suddenly everyone had more immediate worries. With oil heading towards $120 a barrel, the BP share price has been going gangbusters. It is up almost a third over the last year. That’s despite posting a $24bn write down on its 19.75% stake in Russian oil major Rosneft, plus two other joint ventures. 

The BP share price is rocketing

Nothing can stop the BP share price today. First quarter net earnings jumped from $2.63bn to $6.25bn, thrashing analysts’ expectations of $4.49bn. That’s its best performance in a decade. The board has responded by lavishing shareholders with cash. It completed share buybacks totalling $1.6bn in the first three months of this year, and plans a further $2.5bn in the current quarter.

That’s a bold but risky move, as it could provoke a backlash. There are heated demands for a windfall tax on FTSE 100 energy giants BP and Shell. So far, the government has rejected them, and investors don’t seem particularly rattled. If they were, the BP share price wouldn’t have jumped another 7.95% in the last week alone.

BP has even hit its debt reduction target one year early, as the cash flows and flows. The group has endured some tough years, but the action it took then is bearing fruit today. Its rigid cost control measures mean it now breaks even with oil at just $45. That explains the buyback bonanza. It also boosts the dividend outlook.

The forecast yield is now 4.4%. That will be covered a staggering 4.2 times by earnings, which leaves plenty of scope for progression. The BP share price now trades at 13.8 times earnings. With revenues set to rocket, its P/E is forecast to fall to just 5.4%. Operating margins are expected to jump from 8.6% to 12.1%.

BP can’t drill oil and gas forever

Naturally, there are threats. The cost of living crisis will only worsen. The more BP’s profits grow, the angrier campaigners will become. Climate change isn’t going away. BP is taking advantage of the Ukraine crisis to open new North Sea oil fields, but its opportunism could backfire. Management will have to pour money into wind power, hydrogen production and electric vehicle charging networks to silence climate critics and build a future beyond petroleum, to coin a phrase. That will be expensive and the rewards uncertain.

The BP share price is on a roll and yes, I’d possibly buy the stock today. But for long-term success, I’d also want management to show it can make the leap into renewables. It’s not there yet so I’m keeping it on my watchlist for now.

The post The BP share price is up by a third. Should I buy this 4.4% yielder? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The bull case for BP shares

BP released its 2021 full-year results on February 8. The $12.8bn profit figure stood out immediately to investors, and the share price rose over 4% in the days after the release. By comparison, in 2020, BP saw a $5.7bn loss, the latest figure highlighting the turnaround for the firm. It also announced it had reduced net debt for the seventh consecutive quarter. In my eyes, both these factors highlight the managerial strength of the business, which encourages me to buy the shares.

These impressive results helped boost analyst expectations. JP Morgan increased its target from 590p to 600p, with Morgan Stanley also raising its target from 401p to 465p. As mentioned, the current price is just 378p. This gives me confidence that the shares could be a great long-term investment for my portfolio.

Considering the value of its shares, BP is trading on a forward price-to-earnings ratio of 6.6. This seems good value to me, especially considering the recent high profits. Competitors Shell and ExxonMobil are currently trading with 7.7 and 12.3 P/E ratios, respectively. This suggests to me that the current BP share price is undervalued.

BP share price: bear case

An obvious risk I see for BP shares is the global shift towards net zero and increasing ESG concerns among companies. Although BP has made a concerted effort towards cutting emissions, moving forward it’s going to take a huge amount of investment to keep these projects up. The firm already operates with very slim margins, which will come under pressure from outward investment.

In addition to this, the nature of BP’s business is very cyclical. At the moment, commodity prices are soaring, which is great for the business. However, if oil and gas prices crash, the company is in big trouble. This gives it an element of uncertainty in the long term.

BP announced yesterday its plans to divest its 19.75% stake in Russian oil giant Rosneft, following the Russian invasion of Ukraine. This is expected to result in a costly $25bn in exit charges, largely from foreign exchange. Whilst it has insisted this won’t impact any of its long-term strategic and financial targets, it’s definitely a worrying cost.  

The verdict

All things considered, I think that BP shares could be a great addition to my portfolio at its current price. The cheap valuation certainly looks appealing to me, especially considering the encouraging 2021 results. Therefore I would consider buying the shares for my portfolio today.

The post Should I buy BP shares for my portfolio today? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Dylan Hood has no position in any of the shares mentioned in this article. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.