Will UK energy stocks cause another disappointment?

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Joachim Klement of Fidante
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Joachim Klement of Fidante

I cannot count the times I have burnt my fingers investing in oil stocks in the last ten years. Ever since oil started its decline from $150/bbl to less than $30/bbl and back to $75/bbl, there have been multiple tactical rallies that disappeared as fast as they arrived. October has been such a month. At the beginning of the month, oil analysts predicted oil prices going up to $100/bbl by the end of the year as Iran sanctions loomed. But rising output from US producers, together with falling global demand led oil prices declining more than 20% decline in early November.

UK's energy giants seem like an attractive investment in this environment with an average P/B-ratio of 1.45 and a dividend yield of 5.5%. Additionally, both Shell and BP reported fantastic earnings for the third quarter thanks to higher oil prices. Shell managed to post the highest quarterly earnings in four years and accelerated its share buyback programme. BP posted profits twice as high as a year earlier and raised its dividends by 2.5% to 10.25pps.  Fidelity's Wright: The contrarian value in UK large-caps But despite reasonable valuations and attractive yields, UK energy stocks co...

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