If youre a fan of momentum stocks, few FTSE 100 companies can equal the momentum of the following two commoditygiants right now. Can they continue to power ahead in 2017?
Sure of Shell
After years stuck in firstgear, oil and gas giant Royal Dutch Shell (LSE: RDSB) finally showed some dash in 2016. It ended the year 51% higher, making itone of the top 10 performerson the index.It was helped by a strong end to the year, when it rose 11% in the last month alone, driven by the OPEC and non-OPEC production output freezes.
Shells recovery started earlier than that, withthe share price climbing steadily in the wake of last January and Februarys brutal sell-off. Shell was over-sold then, so has it been overbought today? Much of course depends on the price of oil, which continues to climb higher, and now tops $58 for a barrel of Brent crude, an 18-month high, after Kuwait cut production.
Royal opportunity
Ive been sceptical about how far the oil recovery can run. Theres still a strong chance that OPEC and non-OPEC members could backslide on promises, while the US shale rig count continues to climb. The higher oil rises, the more wildcat drillers will enter the market. However, Shell is heavily exposed to the cleaner-burning liquid natural gas market, where the International Energy Agency predictsa bright future, with demand expected to rise 50% by 2040, against 12% for oil.
Shell currently trades on a forecast 15.5 times earnings, so its no longer cheap. The yield is still tempting at a forecast 6.3%, and safer by the day, as energy prices rise. The smooth integration of its BG Group purchase is also a feather in its cap.
Glencore holding
One year ago, mining giant Glencore (LSE: GLEN) looked sunk. It posted an $8bn loss for 2015 as copper prices plunged on falling demand from China, forcing it to scrap its dividend while its debts piled up andinvestors raced for the lifeboats. Yet last year itwas the second-best performing stock on the FTSE 100, rising a stonking 209%. Only fellow miner Anglo American, which also sank like a tonne of iron ore in 2015, did better, soaringan incredible 284%.
So can Glencore repeat itsspectacular trick? It almost certainly cant, given that last year it was in full rebound mode. Today, it trades at a fairly sensible 14.4 times earnings. WhileShells prospects depend on the price of oil, Glencore is hoping that demand from China will hold up. Both will also be crossing their fingers that President-elect Donald Trumps reflation stimulus blitz matchesthe hype.
Glencores earnings per share are forecast to grow an earth-shaking 112% this year, while its dividend should soon yield around 2.4%. Ithas been lifted by todays buoyant start tothe year, with the share price up2.79% today at time of writing, as copper rallies 1% to $5,588 an ounce, helped by signs of strong growth inChinesefactory and servicesactivity. Youcant read much into one days trading, but fornow the force is with both Royal Dutch Shell and Glencore.
The doom-mongers said Brexit would be a disaster for the UK, until the FTSE 100 surprised everybody by rebounding to new highs.
However, this is still a phoney warand the turbulence may return with a vengeance once Prime Minister Theresa May triggers Article 50.
This BRAND NEW special Motley Fool report sets out exactly what Brexit means for your portfolio, and how you can take advantage by picking up top company stocks at bargain basement prices.
Don’t fret about Brexit any longer but click here to read this no obligation report. It will be yours in moments and won’t cost you a penny.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.