While the resources industry may be volatile, I’m taking a look at the investment potential of the share prices of Rio Tinto plc (LON:RIO) (RIO.L), Glencore PLC (LON:GLEN) (GLEN.L), BP plc (LON:BP) (BP.L) and Royal Dutch Shell Plc (LON:RDSB) (RDSB.L).
Glencore seems to have a strong investment outlook in my view. The company has geared itself up for an electric vehicle revolution, which could yet take place if consumer trends continue as they have done in recent years.
With Glencore having a PE ratio of around 13, I think it offers good value for money. While not the cheapest resources share around, I feel that it could produce high returns.
BP’s 6% dividend yield suggests to me that the stock has a large margin of safety. Sure, the oil price is still a long way off its previous highs. But demand growth is expected to beat supply growth this year, which may have a positive impact on the sector’s outlook.
Since BP still has an asset base which could deliver high levels of profitability, I feel upbeat about the company’s long-term outlook.
Shell remains a stock with a solid strategy in my eyes. The company is forecast to post rising free cash flow over the next couple of years and this may mean it can pay down debt, deliver higher dividends or engage in share buybacks.
Excess capital may also be generated from the sale of further assets. With an imposing presence in the LNG market after the BG deal, I’m upbeat about Shell’s outlook.
Rio Tinto continues to have a relatively strong balance sheet in my view. This could provide it with lower risk compared to some of its sector peers if commodity prices become more volatile in future.
With a focus on iron ore, Rio Tinto could deliver further growth if demand for the steel-making ingredient remains buoyant. Therefore, I’m optimistic about its outlook, with its competitive cost base being appealing to me during a volatile period for the wider market.