However, many of these companies are still short of cash and heavily in debt. I’d steer clear of such firms for a little longer yet. The companies catching my eye at the moment have proven assets, net cash, and — ideally — profitable production.

I’ve found three stocks that seem to fit the bill and still look cheap. In this article, I’ll take a closer look at each one. Are further gains likely?

Cash + free gas

Cameroon-focused Bowleven (LSE: BLVN) had net cash of $99m (£79m) at the end of October. This means that the group’s £78m market cap is completely covered by surplus cash.

The market seems to be assigning no value to Bowleven’s 20% stake in the Etinde gas field, which is thought to contain up to two trillion cubic feet of gas in place. Yet Bowleven’s stake in Etinde should soon benefit from $40m of paid-for appraisal work by the field operator NewAge. Bowleven also stands to receive a $25m cash payment, if the field is developed.

With net cash and a book value of 88.9p per share, Bowleven shares should be worth more than 24p. But chief executive Kevin Hart says that he’s assessing “new venture opportunities.” There’s a real risk that Bowleven’s cash will be wasted on risky exploration projects, rather than returned to shareholders.

From Russia, with love

The Russian oil industry has survived the oil crash in much better shape many investors expected, thanks to low costs and the devaluation of the rouble.

Long-time producer Exillon Energy (LSE: EXI) has survived unscathed. The firm’s latest accounts showed net cash of $103.6m at the end of June, equivalent to 45% of Exillon’s £187m market cap.

Exillon trades on just 3.2 times trailing earnings. While broker coverage is thin, the latest forecast I’ve found suggests Exillon could report a net profit of $37.7m this year. That’s equivalent to a forecast P/E of 6.2. The same forecasts also suggest that a dividend of up to 11 cents (8.9p) per share could be paid this year. If so, then Exillon has the potential to offer a yield of more than 7%.

Russia may remain a risky place to invest, but there’s no doubt in my mind that Exillon could deliver further gains.

Small, but perfectly formed

At £38m, North Sea-focused Serica Energy (LSE: SQZ) is pretty small. But it had a $13.1m net cash balance at the end of September, even before receiving payment for September sales.

The group’s profits were hit during the first half of this year by a maintenance shutdown on its main asset, the Erskine field in the North Sea. However, with Erskine back in production since late August, management expects net cash to start rising again.

My calculations show that Serica trades on a trailing P/E of 10. Broker forecasts available through a private subscription service I use indicate that net profit in 2016 could rise to $8.8m. That’s equivalent to a P/E of about 5.2 at current exchange rates.

There’s no dividend, but I believe Serica shares are probably worth more than 14p.

The post These cash-rich oil stocks could be a life-changing buy appeared first on The Twelfth Magpie.

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

It glitters

To be fair, Fresnillo (LSE: FRES) has something most miners don’t, in the shape of recovering precious metals. Fresnillo is the world’s largest producer of silver from ore and Mexico’s second biggest producer of gold. The climb in the prices of those two metals has given its shares a big boost, and they’re up 92% to 1,227p as I write.

After years of falling earnings, the gold and silver recovery is expected to boost earnings more than fourfold this year, and there’s a further 66% rise pencilled-in for 2017. But the problem is Fresnillo’s P/E rating — it’s as high as 60 this year, dropping only to 36 on 2017 forecasts.

That might be sustainable, but it would require silver and gold prices to remain high and soar even higher, and I don’t see that happening for long. Precious metals prices have surely been boosted by uncertainty in China, uncertainty in other emerging markets, and uncertainty over the UK’s membership of the EU. Once those fears settle, it’s going to be hard not to see the attraction of shares again — but it could take a little while yet, and Fresnillo could well come out on top this year.

Another false start?

If you look at the share price of online fashion retailer ASOS (LSE: ASC) over the past few years, you could be forgiven for not getting too enthusiastic over this year’s performance. ASOS shares have put on an impressive 49% since their low in February, to 3,871p today, which looks great. But in April 2015 they were scraping 4,200p, and back in early 2014 they were as high as 7,000p!

That early surge had a lot of dot.com bubble characteristics about it, and after a few problems with expanding supply channels and with exchange rates cutting into margins (and with growth investors simply seeing sense), some reality was restored. And though e-tail does look set to eclipse the high street, ASOS’s valuation still causes me to blink — we’re looking at a P/E for this year of 68, and still as high as 52 on 2017 forecasts.

ASOS could still end this year as one of the FTSE’s biggest winners, but I see a lot of risk in the future growth that’s already built into today’s share price.

Oily multibagger?

Oil and gas explorer Exillon Energy (LSE: EXI) was struggling during the oil price downturn, dropping as low as 62p per share in May. But since then we’ve seen a 54% recovery to 95.5p, as oil looks like it could be stabilising at around $50 per barrel — and the longer the black stuff remains around that level, the more likely it seems that we’ll see further rallies as the year progresses.

Exillon’s production reports have been encouraging, with it producing around 15,000 barrels per day over the past three months. Exillon is profitable too — it’s been growing its earnings nicely over the past few years. And though we’re awaiting updated forecasts, the latest share price puts Exillon shares on a trailing P/E below 4.

Even after the share price climb of recent months, Exillon is still looking cheap to me — might we even see a multibagger by the end of the year?

The post Will Fresnillo plc (+92%), ASOS plc (+49%) and Exillon Energy plc (+54%) be among 2016’s big winners? appeared first on The Twelfth Magpie.

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

Today’s update from the world’s largest silver miner Fresnillo (LSE: FRES) shows that it is making encouraging progress, although it notes that the outlook for the industry remains uncertain. Clearly, with all resources companies they are highly dependent upon the price of commodities and while the outlook for silver and gold is relatively robust, a risk in this regard remains for investors in Fresnillo.

With Fresnillo expected to keep its costs low and being on target to hit 2018 production guidance according to today’s update, it seems to be in a relatively strong position. Due to a wide margin of safety, Fresnillo seems to be worthy of investment at the current time, with a price to earnings growth (PEG) ratio of just 0.5. That may be viewed as somewhat surprising since Fresnillo’s share price has risen by 54% already this year. However, even if it were to rise by another 50%, Fresnillo’s PEG ratio would still be a lowly 0.7 and this indicates that capital gains of that nature are very much on the cards.

A change could come

Also offering significant upside potential is Glencore (LSE: GLEN). Clearly, it is a relatively risky buy because of the potential for commodity price falls, but also because Glencore has been viewed in the past as having an overly leveraged balance sheet. Although it is making progress in this regard, investor sentiment could remain weak nonetheless and act as a brake on the company’s share price.

However, with Glencore forecast to increase its earnings by 79% in the next financial year, it could witness a step change in investor sentiment over the coming year. And with its shares trading on a PEG ratio of only 0.4, they seem to offer 50%+ upside. This doesn’t mean that further gains are guaranteed following Glencore’s 70% surge year-to-date, but it does mean that the company’s risk/reward ratio is highly appealing. As such, for less risk averse investors now could be an opportune moment to buy a slice of the business.

An appealing asset base

Meanwhile, shares in Exillon Energy (LSE: EXI) continue to disappoint, having fallen by around 40% since the turn of the year. That’s despite investor sentiment surrounding the wider oil and gas industry having improved during that period, as well as the release of an upbeat production report last month.

Encouragingly, Exillon’s production in March increased for the first time since November. Oil production reached 14,968 barrels of oil per day (bopd) versus 14,660 bopd in February and with the company having a relatively appealing asset base, its long term future could be reasonably bright. That’s especially the case since it trades on a historic price to earnings (P/E) ratio of less than 3, which indicates that its shares are cheap.

However, with a number of other oil and gas companies benefitting from improving investor sentiment, offering good value for money and upbeat prospects as well as size and scale advantages, there may be better options for 50%+ returns elsewhere.

The post Are Fresnillo plc, Glencore plc and Exillon Energy plc on the cusp of 50%+ returns? appeared first on The Twelfth Magpie.

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

In fact, it appears as though the market is in broad agreement with this viewpoint. Valuations across the sector have fallen dramatically and, in many cases, have already factored in further falls for the oil price. As a result, there are considerable margins of safety on offer which mean that if the oil price does fall, then the share price performance of such companies may be better than expected. Similarly, if the oil price either stabilises or increases, then their shares seem to have significant upside.

For example, oil services company Amec Foster Wheeler (LSE: AMFW) has seen its share price fall by 32% in the last year. And, while its bottom line declined by 8% last year and is expected to fall by a further 12% in the current year, the company’s net profit is due to return to growth next year. Certainly, it may only be 3% growth but, in the current oil sector environment, investors are likely to welcome such news and could demand a higher share price.

Clearly, Amec Foster Wheeler’s valuation has taken a major hit and, looking ahead, its forward price to earnings (P/E) ratio of 10.5 indicates that its shares could move upwards at a rapid rate. Furthermore, with a dividend yield of 5.7% which is covered 1.7 times by profit, the company remains a very appealing income stock which could be a great choice for income-seeking investors.

Similarly, Exillon Energy’s (LSE: EXI) share price has tumbled by 29% since the turn of the year, although in the last month it has risen by 10%. This seems to be a rather excessive fall in its valuation, since Exillon Energy has remained profitable in each of the last three years and has, in fact, been able to increase net profit from £7.5m in 2012 to over £33m in 2014. That’s a rise of 4.4 times in just two years, which indicates that Exillon is performing exceptionally well as a business.

Furthermore, with earnings set to continue their rapid increase in the next two years, Exillon Energy’s share price could gain a boost from improving investor sentiment. And, with it having a forward P/E ratio of just 3.2, there is plenty of scope for this to happen.

Meanwhile, Gulf Keystone Petroleum (LSE: GKP) has also had a troubled recent past, with its share price falling by 59% since the turn of the year. This comes after a challenging 2014 which saw the company’s share price fall by 58% for the calendar year. Despite this, Gulf Keystone Petroleum still trades at a premium to net asset value, with its shares having a price to book value (P/B) ratio of 1.2. Although this is not a high level, a number of its resources peers are now trading at a discount to net asset value due to the uncertain outlook for the sector.

Looking ahead, Gulf Keystone Petroleum is expecting to receive regular payments for exported oil. Although this is clearly positive news, there is still a question mark over the amount already owed to the company by the Kurdistan Regional Government (KRG). And, while its shares may be cheap on an absolute basis, there seems to be better value, less risk and better financial performance available elsewhere.

The post Are Gulf Keystone Petroleum Limited, Amec Foster Wheeler PLC & Exillon Energy Plc 3 Of The Best Oil Stocks Money Can Buy? appeared first on The Twelfth Magpie.

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

However, generalising can be dangerous since there are nearly always exceptions to the rule. As such, the resources sector, while enduring a very challenging period at the present time, could contain a number of companies that are not only worth investing it, but could deliver exceptional returns.

One such example is Genel Energy (LSE: GENL). Looking at its track record would be unlikely to cause many investors to buy a slice of the business since, in the last four years, it has been loss-making in two of them. And, with losses equating to £204m last year (versus a pretax profit of £122m in the previous year), it is clear that Genel is struggling to perform during the low oil price environment.

However, this look set to change. That’s because the company’s operations remain relatively robust (especially considering how closely located it is to the conflict in Iraq/Kurdistan) and, with the Kurdistan Regional Government (KRG) recently announcing a regular payment plan for producers in the region, investor sentiment could begin to pick up as Genel’s financial outlook starts to improve.

On this front, Genel is expected to post a pretax profit in each of the next two years, with £39m and £50m being forecast respectively at the present time. Certainly, these figures are considerably lower than the loss posted last year but, crucially, they show that Genel is able to cope with the dual challenges of a low oil price environment and political instability in the region in which it operates. And, with it having a price to book (P/B) ratio of 0.37, its margin of safety seems to be exceptionally wide and highly enticing for potential investors.

Similarly, Exillon Energy (LSE: EXI) may appear to be a stock worth avoiding right now. After all, its share price has fallen by 24% this year, which indicates that other investors are bearish on its prospects. However, the company has remained profitable throughout the current low oil price environment and, with it having a very lucrative asset base in Russia, is expected to continue to post upbeat profitability in each of the next two years.

In fact, Exillon Energy’s net profit is forecast to rise by 34% this year, and by a further 24% next year. These expectations mean that Exillon Energy trades on a price to earnings growth (PEG) ratio of just 0.1, which indicates that its shares are worth buying at the present time. And, with August’s production numbers breaking three consecutive months of declines, Exillon Energy’s share price may benefit from improving investor sentiment moving forward.

Similarly, engineering company Plexus (LSE: POS) also appears to offer excellent value for money – especially when its track record of growth is taken into account. For example, during the last four years it has been profitable throughout and has posted annualised earnings growth of over 61% during the period. Certainly, growth is due to disappoint this year, with it set to drop to just 5%, before rebounding next year with a figure of 44%.

And, while Plexus trades on a price to earnings (P/E) ratio of 33, its price to earnings growth (PEG) ratio of 0.5 indicates that now is a great time to buy a slice of the business.

The post Are Genel Energy PLC, Exillon Energy Plc And Plexus Holdings PLC 3 Resources Stocks To Buy Right Now? appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

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

Elsewhere, the shares of Latchways (LSE: LTC) and Exillon Energy (LSE: EXI) have also caught my attention today. They are up 48% and 7.7%, respectively, in a plunging market, with the FTSE 100 down 2.6% at the time of writing. 

Aga Rangemaster On The Up

This is great news for shareholders, but how much risk does the trade carry now? 

When initial takeover news emerged in mid-June, AGA stock surged over 30%; back then, it announced that it was holding discussions with US-based Middleby, which offered 185p in cash for each AGA share soon after, valuing the equity of the target at about £129m. 

Whirlpool may or may not make a formal offer, yet the stock of AGA currently trades at 203p and could seriously offer more value to shareholders. Whirlpool is expanding abroad, and AGA would be just a bolt-on deal, so its suitor could well overpay for it. 

Frankly, these situations are ideal for opportunistic traders, but I am after long-term value so I’d likely give it a pass, although more upside is possible. 

Goodbye Latchways

Latchways, a maker of protection systems, said today that it had agreed to be bought by US-based MSA Safety for an enterprise value of £114m.

Under the terms of the acquisition, Latchways shareholders will receive 1,100p in cash for each share they own, which implies a 53% premium over Latchways’ share price on Friday.

Its share price’s 52-week range is between 705p and 1,068p, and it appears clear that its shareholders are being offered a fair deal. The group has never recovered from the plunge in its valuation at the end of 2014, which came in the wake of a profit warning last autumn.

I’d say that this is the best outcome for shareholders, given that the outlook for many of its end markets is still problematic. 

Exillon Energy: Too Risky?

A risky bet (as its price to book value indicates), the stock of Exillon Energy is perhaps the most appealing investment of the three, having risen 7.7% today following the release of a trading update today that showed:

• Net profit down by 45% to $13.2m ($23.8m in H1 2014);

• Earnings before interests, taxes, depreciation and amortisation down by 40% to $30.4m ($50.7m in H1 2014);

• Production down by 7%, with the average production for H1 2015 equivalent to 16,643 bpd.

Operating costs have fallen, but negative working capital should be closely monitored, although capex requirements are covered by its cash balances over the short term. 

“As at 30 June 2015, the outstanding debt had reduced to $54m, as a result of scheduled repayments of principal. Our net cash position was $5.2m,” Exillon also pointed out. 

In short, it could have been much worse: its stock now trades at 108p, or some 20% above the 52-week low of 90p of last week. I am tempted!

Oil prices had risen almost 20% in less than a week but they are down over 3% today on the back of weak factory data from China, which testifies to a highly volatile market environment. I am still convinced that Brent crude oil will trade around $80 per barrel by the end of the year following a less aggressive production policy by the OPEC — well, to me at least, this will be what it takes to invest in Exillon and other similar oil players!

The post Why AGA Rangemaster Group Plc, Exillon Energy Plc & Latchways plc Are Surging Today appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

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