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My first trade - Shell / BP


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OK so I did a 'reasonable' amount of background research on this, but as its my first trade, not nearly enough, BUT I bought shares in BP & Shell today. 

Is this a good move as i just cant see the price get that much lower, looking at the pumps today its shot back to pre covid levels in some places, which to me suggests that they are managing to move the backed up supply now. The oil refinery near me was on full pelt last night. Combined with that both companies shares shot down massively when they halved the divided (used to be a whopping 11% or thereabouts), but Im more concerned at getting in low as I am sure they will reinstate it at some point. Its still OK and I am more in it for owning the company, but a decent dividend is good. I bought the B Shell stock btw. Not the dutch one as there are apparently tax implications.

Shell & BP apparently has a lot of plans to go into renewable & green stuff, but there will still be planes, cars, cruises & what not needed fuel for some time to go & I can see that all kicking off again before too long. Now I did not go crazy & bought £500 of each & I intend to reinvest the profits (assuming there are some) in physical (assuming that goes down) or mining shares to keep these stocks long term (ie retirement age) & still retain my initial investment. 

Good move?? Should have bought on the 31st, but its not that much higher & took a recent dip. I have a sneaky feeling it will shoot up on Monday??
I shall stick to this mantra of buying low, especially when the company will bounce back and carry on. Just waiting for an economy collapse now ;)
Im looking at Cruise liners next, but want mining stocks on a pull back. Why would anyone buy fracking Tesla - crazy!!

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In my opinion your timing and research is good, RDSB are the shares you want, dividend withholding tax on the RDSA ones. I have both companies among others in the sector, to me its a 100% no brainer although perhaps very contrarian at the moment given how much the market hates big oil. Its fashionable to hate them. I am very confident long term (mid 20's), short term I have no idea if we will get further downside or if it shoots up Monday, but be prepared to hold and accumulate through some rough times if oil breaks down again. The downside is limited imo. 

Dividends have been cut on BP by half (still a solid 5-6% dividend depending when you bought), and instead the board are planning to buy back shares using up to 15% of cashflow. The buy backs are discretionary so power has been taken from the shareholders (dividends) and put in the hands of the board, I still expect this to return and compound perhaps 20% per year including dividends over the decade. We will see. 

Shell have cut dividend by 2/3rds, way too far and too fast, I expect this to be raised once oil starts to recover if the board members want to keep their jobs. I expect similar returns over the decade from shell, they are a long term, potentially retirement hold given the dividend potential and position relative to LNG/Hydrogen.

These companies are looking forward at hydrogen production to meet the green agenda (or that is how its being sold), BP in particular, as hydrogen will be the green replacement for natural gas. I am told that gas engineering certificates now include hydrogen, existing infrastructure can be used to transport store and supply it for the most part. There are also geopoitical implications of being able to produce a nations own LNG equivalent (Europe no longer reliant on Russia). This will be renewable or conventional electricity (solar wind nuclear) being used to produce hydrogen, which in turn is used in the existing gas network throughout Europe. Green agenda achieved, strategic energy achieved. Although LNG is cheaper at the moment, these companies have the size and scale to change that over the coming years through investment and development.

As an aside Tesla looks like a shoeshine stock; I don't see anyone excited about oil and no one is talking about hydrogen, just saying. 

Not sure about cruise liners, those are a favourite Robinhood choice so I am staying away. I am looking at Agri shares for inflation (Mosaic, Nutrient, K+S), telecoms (BT.A, VOD, TEF) and infrastructure (DRAX, NG. SSE). I like the big FTSE listed mining shares too but they have gone up too much since march for my liking and are on the watch list. Waiting for a pullback. 

"The further a society drifts from the truth the more it will hate those who speak it." - George Orwell 

Nullius In Verba

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If they both dropped 25% in the next month would you be gutted? or would you see it as a great buying opportunity

If the answer is gutted then you shouldn't invest in them

That's not to say you would be right to buy more, who knows, but I feel like you need that conviction to want to be in them in the first place

That conviction should come from a deep knowledge of the company, industry and future prospects 

For me with silver etf I'd love a dip to buy more but if I had money in oil stocks and they went down I'd be gutted, that tells me I don't know enough about oil to have my money in them

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On 08/08/2020 at 15:51, KDave said:

In my opinion your timing and research is good, RDSB are the shares you want, dividend withholding tax on the RDSA ones. I have both companies among others in the sector, to me its a 100% no brainer although perhaps very contrarian at the moment given how much the market hates big oil. Its fashionable to hate them. I am very confident long term (mid 20's), short term I have no idea if we will get further downside or if it shoots up Monday, but be prepared to hold and accumulate through some rough times if oil breaks down again. The downside is limited imo. 

Dividends have been cut on BP by half (still a solid 5-6% dividend depending when you bought), and instead the board are planning to buy back shares using up to 15% of cashflow. The buy backs are discretionary so power has been taken from the shareholders (dividends) and put in the hands of the board, I still expect this to return and compound perhaps 20% per year including dividends over the decade. We will see. 

Shell have cut dividend by 2/3rds, way too far and too fast, I expect this to be raised once oil starts to recover if the board members want to keep their jobs. I expect similar returns over the decade from shell, they are a long term, potentially retirement hold given the dividend potential and position relative to LNG/Hydrogen.

These companies are looking forward at hydrogen production to meet the green agenda (or that is how its being sold), BP in particular, as hydrogen will be the green replacement for natural gas. I am told that gas engineering certificates now include hydrogen, existing infrastructure can be used to transport store and supply it for the most part. There are also geopoitical implications of being able to produce a nations own LNG equivalent (Europe no longer reliant on Russia). This will be renewable or conventional electricity (solar wind nuclear) being used to produce hydrogen, which in turn is used in the existing gas network throughout Europe. Green agenda achieved, strategic energy achieved. Although LNG is cheaper at the moment, these companies have the size and scale to change that over the coming years through investment and development.

As an aside Tesla looks like a shoeshine stock; I don't see anyone excited about oil and no one is talking about hydrogen, just saying. 

Not sure about cruise liners, those are a favourite Robinhood choice so I am staying away. I am looking at Agri shares for inflation (Mosaic, Nutrient, K+S), telecoms (BT.A, VOD, TEF) and infrastructure (DRAX, NG. SSE). I like the big FTSE listed mining shares too but they have gone up too much since march for my liking and are on the watch list. Waiting for a pullback. 

Thanks for your insight much appreciated. Yes I looked at the long term prospects & yes Shell looks set to win overall, especially when compared to Exxon. They need to adapt or die & companies that are 100 years old should be able to pull it out the bag and seem to already be doing a good job at adapting.  

Not too bothered about dividends at the moment as I am sure Shell will reinstate them. The fact BP cut half is a nice gesture, considering they are up against some very strange situations. I agree with Carnival, I am very much less invested in a stock when everyone is piling into it, they can very easily go under I think on a second wave given their storage fees for the ships, massive staffing & I guess have huge marketing costs - not looked into it? The office in Southampton alone must be costing them many millions a year in costs, but I guess they own that outright so perhaps not??

On 08/08/2020 at 16:24, Kman said:

If they both dropped 25% in the next month would you be gutted? or would you see it as a great buying opportunity

If the answer is gutted then you shouldn't invest in them

That's not to say you would be right to buy more, who knows, but I feel like you need that conviction to want to be in them in the first place

That conviction should come from a deep knowledge of the company, industry and future prospects 

For me with silver etf I'd love a dip to buy more but if I had money in oil stocks and they went down I'd be gutted, that tells me I don't know enough about oil to have my money in them

If they do go down again, I shall possibly buy more, but looking at the costs at the pumps I really dont think it will happen as the supply & demand has picked up again, especially in countries like the UK where its still 34 in the shade at 8pm!! People will be driving their cars after lockdown. Many of my neighbours are now on holiday including all my family, who traveled on a plane yesterday - so thats good news as thats a few more barrels down ;)

but I think the emerging markets & non western dividend ETF's are taking my fancy ATM. They are reasonable safe long term & I certainly think countries like China will reign stronger than the west in 20 years time. Thats for the long haul - I need to spend some time looking into that.  :)

Waiting for a decent pull back on mining. June rates. When I get funds I shall put in an auto purchase order at a set rate on 3 key safe bet gold mines like Royal etc. Not experienced or rich enough for individual juniors. 

Edited by Stacktastic
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22 hours ago, StackerCollector said:

Also made a tiny purchase of 30 shares of RDS B today. When price drops lower, I'll average in. If the shares double in value over the next 20 years and pay a yearly average dividend of 4% I'll be happy.

I expect to see dividends going higher from next year onwards on shell, I reckon 3-5 times return over the decade including them. 

"The further a society drifts from the truth the more it will hate those who speak it." - George Orwell 

Nullius In Verba

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On 10/08/2020 at 12:56, StackerCollector said:

Also made a tiny purchase of 30 shares of RDS B today. When price drops lower, I'll average in. If the shares double in value over the next 20 years and pay a yearly average dividend of 4% I'll be happy.

1 hour ago, KDave said:

I expect to see dividends going higher from next year onwards on shell, I reckon 3-5 times return over the decade including them. 

I can't see why they won't eventually put it back to what it used to be or near enough, when they are in profit? Having said that I am happy with 4.4%. The real risk long term is that they wont adapt to greener options very well, or get outcompeted by newer companies & tech that they just don't understand or get into in time. A plane just went over my house, so for the time being I cant see how it can stay that low for much longer as i get the impression the barrels are starting to move from storage? Its still looking very horizontal though. if the stockmarket tanks & there are no lockdowns, then the share price should certainly increase, especially if there are any large wars in the interim. I am new to this but it really feels like a good shitstorm asset to own, especially during inflation. ;)

I don't want my eggs in one basket, so will buy some world covering dividend ETF's soon and cost average unless it crashes again. 

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3 hours ago, Stacktastic said:

I can't see why they won't eventually put it back to what it used to be or near enough, when they are in profit? Having said that I am happy with 4.4%. The real risk long term is that they wont adapt to greener options very well, or get outcompeted by newer companies & tech that they just don't understand or get into in time. A plane just went over my house, so for the time being I cant see how it can stay that low for much longer as i get the impression the barrels are starting to move from storage? Its still looking very horizontal though. if the stockmarket tanks & there are no lockdowns, then the share price should certainly increase, especially if there are any large wars in the interim. I am new to this but it really feels like a good shitstorm asset to own, especially during inflation. ;)

I don't want my eggs in one basket, so will buy some world covering dividend ETF's soon and cost average unless it crashes again. 

Don't see any competition for RDS yet on "green" technologies. And if they do pop up, RDS has enough capital to buy them up. If their management is smart enough they will make sure they stay one of the global players. And they are already investing heavily in wind and solar, coming up is of course hydrogen as well. I want to buy more RDS shares as I think they will be around for another 100 years+. RDS will be one of my income shares (as opposed to growth stock).

BP I don't like for one reason - in the past 5 years their dividend cover was below 1.0 for 4 of these 5 years. If a company has to borrow money so they can pay a dividend.... ouch!

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Shell and BP are very much front running the renewable/decarbon push, its the US companies that are interested in remaining oil producers primarily. The board of Chevron for example are not ashamed of what they do and tell share holders to vote against proposals that are related to climate change, the issue is the share holders want to go in that direction by the look of things. 

Long term I have no concerns about buying these companies, certainly not at 20 year lows, the dividend cuts are a positive for BP and Shell so long as they use the funds to position for the coming cycle. Investing means taking a long view in good companies, investing in big oil in particular is taking a long view and then being paid to hold through the volatility over decade long cycles. These are huge companies that have more wealth and resources at their disposal than some countries and they have been in business for centuries (Exxon has been in business for 135 years). They think and operate long term. They pay dividends rain or shine due to the decades long business cycle of oil. You as a shareholder are being paid to absorb the volatility that comes with those timelines. BP borrow to pay a dividend because they are not thinking 6 months or a year ahead, they are looking 5, 10 years ahead. The debt used to pay the dividend today is not being measured against today's oil prices, its about tomorrows oil prices. Its not about todays inflation rate but it is about todays interest rates and tomorrows inflation rates. 

As an aside - the cuts to shell and BP dividend are indicative that something big has changed outside of oil in my view. Shell had maintained its dividend since the second world war, but decided to cut it in the first quarter of 2020, that kind of thing does not happen for a little blip in the road caused by a weak flu virus that is killed by warm water and detergent. Think back over the past 70 years. All the wars, all the diseases, the bad governments, the threat of nuclear annihilation, yet the dividends kept coming! So the cuts are about something much bigger. I believe we are at the end of the credit cycle, it will not happen over night but once inflation kicks off and interest rates being to rise, it will become clear that the credit fuelled consumer will not be driving the economy over the next decade as they have for the past 50 years. The economy is going to change in a big way. Lets just say that China is going to have some western competition.

"The further a society drifts from the truth the more it will hate those who speak it." - George Orwell 

Nullius In Verba

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8 hours ago, Tn21 said:

Which broker did you end up buying with @Stacktastic

The Mcdonalds of Brokers. Trading 212. ;)

16 hours ago, StackerCollector said:

Don't see any competition for RDS yet on "green" technologies. And if they do pop up, RDS has enough capital to buy them up. If their management is smart enough they will make sure they stay one of the global players. And they are already investing heavily in wind and solar, coming up is of course hydrogen as well. I want to buy more RDS shares as I think they will be around for another 100 years+. RDS will be one of my income shares (as opposed to growth stock).

BP I don't like for one reason - in the past 5 years their dividend cover was below 1.0 for 4 of these 5 years. If a company has to borrow money so they can pay a dividend.... ouch!

 

15 hours ago, KDave said:

Shell and BP are very much front running the renewable/decarbon push, its the US companies that are interested in remaining oil producers primarily. The board of Chevron for example are not ashamed of what they do and tell share holders to vote against proposals that are related to climate change, the issue is the share holders want to go in that direction by the look of things. 

Long term I have no concerns about buying these companies, certainly not at 20 year lows, the dividend cuts are a positive for BP and Shell so long as they use the funds to position for the coming cycle. Investing means taking a long view in good companies, investing in big oil in particular is taking a long view and then being paid to hold through the volatility over decade long cycles. These are huge companies that have more wealth and resources at their disposal than some countries and they have been in business for centuries (Exxon has been in business for 135 years). They think and operate long term. They pay dividends rain or shine due to the decades long business cycle of oil. You as a shareholder are being paid to absorb the volatility that comes with those timelines. BP borrow to pay a dividend because they are not thinking 6 months or a year ahead, they are looking 5, 10 years ahead. The debt used to pay the dividend today is not being measured against today's oil prices, its about tomorrows oil prices. Its not about todays inflation rate but it is about todays interest rates and tomorrows inflation rates. 

As an aside - the cuts to shell and BP dividend are indicative that something big has changed outside of oil in my view. Shell had maintained its dividend since the second world war, but decided to cut it in the first quarter of 2020, that kind of thing does not happen for a little blip in the road caused by a weak flu virus that is killed by warm water and detergent. Think back over the past 70 years. All the wars, all the diseases, the bad governments, the threat of nuclear annihilation, yet the dividends kept coming! So the cuts are about something much bigger. I believe we are at the end of the credit cycle, it will not happen over night but once inflation kicks off and interest rates being to rise, it will become clear that the credit fuelled consumer will not be driving the economy over the next decade as they have for the past 50 years. The economy is going to change in a big way. Lets just say that China is going to have some western competition.

Thanks for the input thats very helpful. :)

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You are welcome, remember it's just my opinion that could be wrong and not advice, do what you think is best for your situation. 

"The further a society drifts from the truth the more it will hate those who speak it." - George Orwell 

Nullius In Verba

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OK I made the most of this drop in price today and bought 

Barrick, Franco Nevada, Royal Gold & iShares Producers. 
£100 approx in each account. I will top it up when the dip & do that relative to how much they dip in relation to June levels. 

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On 08/08/2020 at 16:24, Kman said:

If they both dropped 25% in the next month would you be gutted? or would you see it as a great buying opportunity

You were not wrong there, still dropping. I am considering buying more, but might cost average it? 
I cant see Shell ever going under & they will start selling more fuel at some point wont they? 

What would happen if the makets completely bottom out & reset out of interest? Would I be on a loss, would I have to wait 10-20 years for it to go back up?
Im not toughing any other stocks, even ETF's until I know that this wont happen. Mining stocks are OK I hope, although my portfolio is -£30 atm!. ;)

 

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4 minutes ago, Stacktastic said:

What do yaaal make of this? I am being agist here, cant take him seriously - he looks about 15!! 😛

Got to agree with you - He does look "babyish"! - 😘

However he has either got a good grounding /knowledge or has learnt the "script" perfectly!

He comes across quite fluently! 

 

 

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41 minutes ago, Stacktastic said:

You were not wrong there, still dropping. I am considering buying more, but might cost average it? 
I cant see Shell ever going under & they will start selling more fuel at some point wont they? 

What would happen if the makets completely bottom out & reset out of interest? Would I be on a loss, would I have to wait 10-20 years for it to go back up?
Im not toughing any other stocks, even ETF's until I know that this wont happen. Mining stocks are OK I hope, although my portfolio is -£30 atm!. ;)

That would depend on what you mean by bottom out & reset. The markets bottomed out back in March and oil has not recovered largely due to oversupply, lower demand for oil. This we expect to return in the coming quarters.  A reset is less defined, one version is complete economic collapse in which all stock holdings go to nothing as the money they are valued in goes to nothing.  Tangible assets would still have some value but with full collapse of the economy there would be no cash flow, no productivity, no earnings for companies, so stocks become next to worthless. 

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49 minutes ago, Martlet said:

 just poorly informed views. Doesnt understand PE or real investor sentiment, completely disregarded value of dividends. 

57 minutes ago, 5huggy said:

a good grounding /knowledge or has learnt the "script" perfectly!

He comes across quite fluently! 

I wonder what market cap canal boats hold? 😛 - cruise, shipping & military boats vehicles would be a better example as they have desiel engines & wont be converted to Electric any time soon. air craft too. I think Shell would have worked out how much oil reserve there are dont you think? if it was running out they would have moved on long ago. 

Not bad & as you say very fluent, I should not be knocking him as he has some good points, excluding the amazing PE ratios. but this is a real example of the Tesla type stock traders, whom will loose a lot of money if the below occurs. Unfortunately Youtube is littered with people that don't fully understand what they are talking about. I agree that it certainly is not a short term trade, it's a hold long term one, especially if they bring the dividend back to 11%. He is 20, he will kick himself in 10 years time, especially if all his tech stock go negative next year!!

57 minutes ago, Martlet said:

That would depend on what you mean by bottom out & reset.

No cash flow, no productivity, no earnings for companies, so stocks become next to worthless. 

Your second paragraph. :) but as you have said it's very tangible so crude oil could shoot up during an economic downturn & out perform non tangible stock prices, thats one of the reasons I bought it. I am considering food production of some sort also?

Interesting that this insightful look is this persons first video. This could be a very good source of stock understanding with very few views potentially things other people might have missed? https://www.youtube.com/channel/UCtlVbJyLkgfLyoJzK2pb_0w/videos I shall subscribe to that one. 

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57 minutes ago, Stacktastic said:

What do yaaal make of this? I am being agist here, cant take him seriously - he looks about 15!! 😛
 


 

His channel is a click bait grift for you to use his trading 212 link.  Investing for beginners, by a beginner.

Fair play to him though, he’s trying to make himself as a youtube personality.  Over time he will get a following from other young investors.  Maybe it will get young people to think about their money and investing for the future. 
 

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Pardon the puns but it's flipping tanking now. I am going to have to refine my position as I was a bit oily to invest. 😛
Might hit March lows soon! I think I will cost average it an add £100 a day. Will get in before the US markets open. 

 

shell.png

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3 hours ago, Stacktastic said:

What do yaaal make of this? I am being agist here, cant take him seriously - he looks about 15!! 😛

When I see videos like this it makes me want to buy more. :D

He doesn't like dividends. He doesn't understand dividends. He thinks trading capital growth for dividend income is wrong.

He doesn't know what oil is. He thinks BP and Shell should "improve the quality of oil" they produce. 

He mentions these stocks are at 20 year lows and that this is bad, very bad. He likes Tesla. 

👍

Edited by KDave

"The further a society drifts from the truth the more it will hate those who speak it." - George Orwell 

Nullius In Verba

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22 minutes ago, Stacktastic said:

Pardon the puns but it's flipping tanking now. I am going to have to refine my position as I was a bit oily to invest. 😛
Might hit March lows soon! I think I will cost average it an add £100 a day. Will get in before the US markets open. 

I have a sliding support line drawn in for RDSB that I think is right minus bad news or a slump in oil itself

~10.50 currently sliding down to ~10 in October

1827655771_rsdbbottom.thumb.png.e7e4efe646aecda5c8f7f46a60602718.png

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23 minutes ago, KDave said:

He likes Tesla. 

👍

Not looked, but I guessed he might have invested in Tesla. Thats on my bucket list if or when the Nasdaq tanks. As long as Musk is alive that will do BIG things in the next 20 years. 

17 minutes ago, Kman said:

I have a sliding support line drawn in for RDSB that I think is right minus bad news or a slump in oil itself

~10.50 currently sliding down to ~10 in October

1827655771_rsdbbottom.thumb.png.e7e4efe646aecda5c8f7f46a60602718.png

Yes I can see that happening actually. I don't think it will remain that low for long though. 
I am going to continue to invest regularly. Not sure to do the same for BP, what do you think???

This is a fabulous dumbF guide to oil. Really nice description.
Get head phones as i could not hear him. 
I like the fact that it cant be stopped coming out of the well & its also a perishable commodity like Milk. 

A mine can stop extraction where as an oil well cant, so combined with limited supply storage and also political issues with SA & Russia its a perfect bargain stock assuming the business does not go under. :)


 

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