However, falling share prices can also present opportunities for investors to profit. They may offer a wider margin of safety than they previously did, and this can lead to high returns over a sustained period of time. Certainly, it can take time for those gains to be realised, but in the long run the idea of buying low and selling high can be highly effective. With that in mind, here are two underperforming stocks which could post successful turnarounds.

Improving outlook

Reporting on Thursday was oil and gas company Amerisur Resources (LSE: AMER). The South America-focused business reported encouraging results regarding Platanillo-25, which is a medium step out directional well that was recently drilled. The outcome of the drilling supports the view that there is significant further upside in the Platanillo field.

It was drilled to a total depth of 8,699ft and the company is now side-tracking Platanillo-25 in order to locate a production well further up-dip and nearer to Platanillo-21. There it expects to find better reservoir quality and additional pay thickness, which could mean more sustainable production. Once the side track is complete, Platanillo-27 will be drilled.

The company also reported that the long-term test (LTT) off Matiposa-1 is on track to start at the end of October. This could help to diversify the company’s production base, and will also add further material production to the company in the near term.

With progress being made on its strategy, Amerisur could become more popular among investors and this could help to push its share price higher. Clearly, it is dependent upon further news from its projects, but it appears to have growth potential in the long run due partly to its price-to-earnings (P/E) ratio being only 11.2.

Growth potential

Also offering growth potential in the long run is sector peer Ophir Energy (LSE: OPHR). The Asia and Africa-focused company is forecast to move back into the black in the next financial year, with a pre-tax profit of £22m being anticipated by the market. This could help to improve investor sentiment in the stock and may lead to an improved outlook for its share price following a fall of 13% during the last year.

Clearly, the company’s financial outlook is dependent on the oil price. In recent months, it has increased as supply cuts have started to rebalance demand and supply across the industry. Looking ahead, further rises could be possible due to the potential for further cuts and continued growth in demand. Therefore, now could be an opportune moment to buy a slice of Ophir Energy ahead of what may prove to be a stronger period for the wider oil and gas industry.

The post 2 small-cap growth stocks I’d buy and hold for 25 years appeared first on The Twelfth Magpie.

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Peter Stephens does not own shares in any company mentioned. The Motley Fool UK has recommended Amerisur Resources. 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.

Drugs darling

Medicines play Shire (LSE: SHP) emerged from the first quarter as one of the FTSE 100’s biggest fallers in often-choppy trading conditions.  Investor confidence has shaken in recent months, as concerns over the strategic advantages of Shire’s $32bn takeover of biopharmaceuticals specialist Baxalta have weighed.

Still, it could be argued that Shire’s share price under-performance since the start of 2016 leave the firm dealing at irresistible prices at present. The City expects Shire to enjoy an 11% earnings bounce in 2016, resulting in an excellent P/E ratio of 13.2 times.

I reckon this is decent value given the Shire’s improving product pipeline — the pharma play currently has 14 products in or around the Phase III testing phase — not to mention the positive impact of rising global healthcare investment on future earnings.

Still sinking

Shares in oil explorer Ophir Energy (LSE: OPHR) have failed to reflect recent Brent crude strength, the benchmark having climbed back above the $40 per barrel milestone in March.

Market sentiment towards the broader oil segment remains fragile, as further swathes of disappointing Chinese economic data, combined with fading hopes for a co-ordinated supply cut by major global producers, have weighed.

Ophir Energy announced last month that it had incurred a $376m pre-tax operating loss in 2015 as a tanking oil price prompted massive impairments. On top of this, the company’s capex-intensive operations also caused net cash to slump to $355m as of December, collapsing from $1.17bn a year earlier.

The City expects Ophir Energy to keep pumping in losses until 2018 at the earliest. With the supply imbalance washing over the oil market steadily worsening, I believe Ophir Energy can expect further share price weakness looking ahead.

A banking beauty?

The steady share price downtrend that kicked off last summer at Barclays (LSE: BARC) is showing no signs of letting up. The stock shed almost a third of its value during the first quarter alone, and remains on the cusp of hitting fresh multi-year troughs.

The entire banking industry has found itself on the rocks in recent months — indeed, Barclays, RBS and HSBC were three of the FTSE 100’s top five fallers during quarter one — as the flailing global economy has again raised fears over the strength of the financial sector. Meanwhile, concerns over the consequences of a ‘leave’ vote in June’s referendum has done the sector no favours, either.

The age-old problem of misconduct-related penalties has also remained a millstone around the sector’s neck, with Barclays itself setting aside another £1.45bn for PPI-related claims during the final quarter of 2015 alone.

As a consequence, Barclays has shocked investors by electing to slash the dividend through to the close of 2017, more than halving it to 3p per share from 6.5p in recent years. But this may not be the end of the matter, as the number of PPI claimants is expected to shoot higher ahead of a possible 2018 deadline.

Fears over the future direction of the bank under new CEO Jes Staley have also weighed on the bank, with Barclays having announced the sale of its African banking assets, massive changes across its Investment Bank, and forthcoming measures to split the bank into two separate divisions in recent weeks.

The City expects Barclays to enjoy a 1% earnings advance in 2016, resulting in a P/E rating of just 10.5 times. While this suggests the bank’s upheavals are currently priced in at current levels, I believe there is enough mud in the water to push the bank’s stock still lower in the months ahead.

The post Can 1st Quarter Losers Barclays PLC (-32%), Shire PLC (-16%) & Ophir Energy Plc (-22%) Bounce Back? appeared first on The Twelfth Magpie.

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

Looking ahead, Plexus is shifting its strategy and will focus on cutting costs, reducing investment and also improving cash conversion to shore up its financial position. This seems to be a sound response to what are unprecedented trading conditions and despite such an environment, Plexus continues to be in discussions regarding a number of potentially significant projects worldwide. As such, its long-term outlook may still be relatively positive.

Clearly, Plexus is undergoing a very challenging period at the present time and with the potential for further falls in its valuation as the market adjusts to expectations in the short run, it appears to be a stock to watch rather than buy.

Think positive

Also reporting today is Ophir Energy (LSE: OPHR). Its shares have risen by 6% for two main reasons. Firstly, it has signed a Heads of Terms with Schlumberger for the latter to become an upstream partner in the former’s Fortuna FLNG project in Equatorial Guinea. This is positive news because it shows that the project is making progress despite challenging operating conditions, and it also helps to free up Ophir’s balance sheet and improve its financial flexibility.

Secondly, Ophir announced a relatively positive trading update that showed production in 2015 was higher than anticipated at 13,000 barrels of oil equivalent per day (boepd). And with Ophir having a net cash position of $360m and a low-cost production base that is cash generative materially below current commodity prices, its outlook appears to be rather positive. Certainly, Ophir is expected to remain lossmaking in 2016, but it could prove to be a sound, albeit risky, buy for the long term.

Worth the risk?

Meanwhile, Amec Foster Wheeler (LSE: AMFW) also continues to experience difficult trading conditions, with its second half update (released in November) stating that it has refreshed its strategy in response to an uncertain outlook. As such, the company has increased its cost-cutting targets, reduced future dividend payments by 50% and will focus on exiting low growth areas.

With Amec Foster Wheeler’s bottom line due to flatline this year, investor sentiment could remain weak following the 51% decline in the company’s share price during the last six months. However, with Amec Foster Wheeler trading on a price-to-earnings (P/E) ratio of just 6.5, it’s dirt cheap and for less risk-averse investors it seems to be a very strong buy for the long term.

The post Are Plexus Holdings PLC, Ophir Energy Plc And Amec Foster Wheeler PLC Too Risky To Buy After Recent Updates? appeared first on The Twelfth Magpie.

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In other words, while energy demand is forecast to rise in-line with an increasing world population and the industrialisation of the emerging world over the next few decades, the proportion generated by cleaner methods may be higher than previously thought. As a result, many investors are now seeing the glut in supply of a number of resources and concluding that growth is more likely to positive in cleaner, greener fuels in future years.

One company which has benefitted from this shift in investor sentiment is alkaline fuel cell producer AFC Energy (LSE: AFC). Its share price has risen by 220% since the turn of the year as it has gradually progressed through a number of its key milestones as it seeks to complete its 2015 Power Up programme.

Further positive news was released today, with AFC signing a Heads of Agreement with Dutco to jointly fund and develop a business plan for the large-scale deployment of AFC’s fuel cells across the Middle East. This could prove to be a strategically important region for the company and could contribute significantly to its plan for 1GW of fuel cell development by 2020.

Clearly, AFC is a relatively high risk business which lacks the size, scale and financial stability of large energy companies. However, it appears to offer high potential rewards and, with it turning a profit in its most recent half-year, appears to offer a more viable business opportunity than many equivalent-sized oil or mining exploration companies. As such, for less risk averse investors it could be a sound long term buy.

Of course, oil and other fossil fuels are still very likely to be in-demand in the coming years and the fall in their prices could be reversed. Moreover, the valuations on offer within the industry indicate that there are significant margins of safety on offer. However, there are also a number of resources companies which may struggle to post strong share price gains over the medium term.

One example is Ophir Energy (LSE: OPHR). It is expected to post a loss in the current year and, while its share price fall of 51% in the last year appears to price this in, 2016 is also due to be a disappointing year for the business. That’s because, although losses are due to narrow, Ophir is still expected to be in the red. This, alongside the loss of a major financial backer earlier this year and a disappointing recent drilling update, means that AFC could be a better buy.

Similarly, Vedanta (LSE: VED) is also enduring a challenging financial period, with pretax profit for 2016 expected to be less than a fifth of its 2011 level. Despite this, Vedanta’s share price appears to be rather highly valued, with the company trading on a forward price to earnings (P/E) ratio of 21.6. As such, and with a number of other oil and mining companies offering significantly lower ratings, Vedanta does not hold considerable appeal as a purchase at the present time.

The post Is AFC Energy plc A Better Buy Than Ophir Energy Plc & Vedanta Resources plc? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of AFC Energy. 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.

Of course, it is not all that long ago since there were predictions of $200+ per barrel. Since then, though, a slowing Chinese economy as well as increased production of oil have combined to more than halve the price of black gold and send predictions for its future price level southwards.

The reality, though, is that the price of oil is a known unknown. For investors who can take a long term view and cope with a relatively high degree of volatility, the margins of safety on offer at a number of oil producers, explorers and supper services companies indicate that now is an opportune moment to buy.

Clear upside

For example, BP (LSE: BP) trades on a price to book value (P/B) ratio of just 0.96 which, for a company with such an appealing asset base, indicates that there is clear upside potential. Furthermore, the company is taking a prudent approach to the future direction of the oil price, with it stating in its recent third quarter results that it is planning on operating within an environment of $60 oil. This means that BP is focused on improving productivity, reducing costs and generating efficiencies over the medium term, which is likely to have a positive impact on its bottom line.

In addition, BP remains committed to paying a relatively generous level of dividends, with the company stating in its third quarter results that it intends to maintain its current level of payout over the medium term. This means that BP should yield around 6.8%, which makes it one of the most appealing, albeit risky, income plays in the FTSE 100.

Very sustainable

Similarly, with Amec Foster Wheeler’s (LSE: AMFW) share price having fallen by 16% since the turn of the year, it now offers a yield of just over 6%. Unlike BP, though, Amec Foster Wheeler’s dividend is well-covered by profit at 1.7 times, which indicates that they it’s very sustainable, even if profitability comes under pressure in future years.

Looking ahead, though, the company is forecast to return to positive earnings growth next year, which has the potential to improve investor sentiment and push its share price higher. With Amec Foster Wheeler trading on a price to earnings (P/E) ratio of just 9.7, there is considerable rerating potential and this makes it a very appealing buy at the present time.

One to watch

Meanwhile, Ophir Energy (LSE: OPHR) today issued an update on its exploration well at the Soy Siam prospect in Thailand. The well was drilled to a depth of 1,627m, but all the reservoirs which were encountered were dry and no hydrocarbon shows were encountered. Therefore, the well has been plugged and abandoned, with the rig now set to move on to drill the Parichat South West prospect.

Although disappointing, Ophir’s share price has fallen only marginally today but, with the company set to move into loss-making territory in the current year, investor sentiment could decline and cause the company’s share price to come under a degree of pressure. This, plus the loss of a major investor earlier in the year, means that Ophir may be a stock to watch rather than buy at the present time.

The post Are BP plc, Ophir Energy Plc And Amec Foster Wheeler PLC Set To Soar? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of BP. 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.

Glencore

It is little surprise that diversified resources giant Glencore (LSE: GLEN) has taken an absolute pasting so far in 2015. The business has been the worst performing stock across the entire mining sector and has fallen 60% since the turn of the year. And despite measures to rectify collapsing commodity prices – the business has vowed to slash both copper and zinc production during the past month — I reckon the firm remains a perilous long-term selection.

Sure, the company has enjoyed a solid bump higher in recent weeks as material prices have recovered from multi-year lows. But as data from commodities gorger China continues to disappoint — numbers this week showed imports slump 20.4% in September, speeding up from August’s 13.8% slide — and the rest of the world’s major producers increase rather than shutter production, I reckon shares in Glencore should head lower again along with commodity prices.

Aberdeen Asset Management

Financial services specialists Aberdeen Asset Management (LSE: ADN) have also come unstuck during the course of 2015, the stock having conceded 22% since the start of January. The company’s heavy emerging market focus has left it at the mercy of patchy investor confidence, with concerns over a Chinese economic ‘hard landing’ leading client activity to fall.

But unlike Glencore, I believe Aberdeen Asset Management is a great long-term selection as the investment case for developing regions remains strong. And sustained share price weakness leaves the business dealing on a prospective P/E rating of just 11.3 times — comfortably below the value benchmark of 15 times or below — and a dividend yield of 5.5% blows the FTSE 100 average out of the water.

Johnson Matthey

Shares in Johnson Matthey (LSE: JMAT) have surrendered more than 27% of their value since the turn of 2015, and I do not believe the pain could be quite over for the London-based business. Although precious metals have recovered some ground in recent weeks — indeed, embattled platinum has risen around 10% in the past fortnight alone to reclaim the $1,000 per ounce marker — I reckon the potential for fresh weakness could batter the refiner’s top line yet again.

On top of this, uncertainty over the future of the diesel engine also makes Johnson Matthey a dicey pick in my opinion. The business builds autocatalysts for use in both petrol and diesel vehicles, but the latter is by far the most lucrative field for the London firm. With legislators running the rule over the environmental impact of diesel power following the Volkswagen emissions scandal, the long-term sales outlook at Johnson Matthey remains sketchy to say the least.

Ophir Energy

I am also far from bullish concerning the investment appeal of Ophir Energy (LSE: OPHR) thanks to the significant supply/demand imbalance washing over the oil market. The fossil fuel producer has seen its share price shuttle 28% lower since January, erasing gains printed at the start of the year as crude values have toppled once again.

The Brent benchmark remains perched worryingly around the $50 per barrel mark, unable to break convincingly higher as OPEC’s determination to grab market share — combined with solid US output and rising Russian output — crimps investor sentiment. And should Chinese data continue to disappoint, I expect Ophir Energy to keep on tumbling as its robust cash pile dwindles and the economic viability of its blockbuster projects come under scrutiny.

The post Are 2015’s Losers Glencore PLC, Aberdeen Asset Management plc, Johnson Matthey PLC And Ophir Energy Plc Poised To Bounce Back? appeared first on The Twelfth Magpie.

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