The Week In Review: BHP Billiton enjoys boom in oil and commodity prices

Like the big oil companies, the world's mining majors are experiencing an embarrassment of riches due to very high commodity prices. BHP Billiton is in the happiest position: it is both the world's biggest miner and has a substantial oil production business, too.

Like the big oil companies, the world's mining majors are experiencing an embarrassment of riches due to very high commodity prices. BHP Billiton is in the happiest position: it is both the world's biggest miner and has a substantial oil production business, too.

The company reported an 83 per cent jump in profit for the year ended June, a whopping $3.5bn (£1.9bn), and is forecast to make $5bn next time around.

The reason for the bonanza is that global demand for raw materials has boomed, and stockpiles have been whittled down, thanks to improved economic growth and the industrial revolution in China.

Although Chinese growth has moderated slightly, the economy there is still roaring ahead by any standard. Chinese industry has a voracious appetite for the commodities that BHP Billiton can supply, such as copper, aluminium, iron ore and coal. The company's profits from selling base metals, for instance, were up more than 300 per cent in the year.

The message is that these prices levels - in many cases the highest seen in years - are set to continue. To take advantage, the company has been bringing new mines on-stream.

BHP Billiton's size and its oil business give it the widest spread of products all across the globe, making it the ideal investment in this sector. Buy.

EDINBURGH OIL & GAS

This company is why many people play the stock market. What was a speculative little oil explorer hit the big time three years ago when the Buzzard oil field, in which it holds a 5 per cent stake, turned out to be the biggest oil find in the North Sea in more than a decade. The shares are up eightfold. Work to build the rigs is about 30 per cent complete, is on time and is on budget. Oil should start flowing by October 2006, and the shares are still a buy for the bold punter.

TURBO GENSET

Turbo Genset could offer the hope of a new mobile power generator that will allow businesses to become self-reliant, gen- erating their power on-site, and environmentally friendly. But it has taken longer than expected to develop the kit, and the company is struggling to find a commercially viable product. The first commercial sale of a 1.2MW generator, to a US landfill company, is akin to a pilot project, and the company is on course to run out of money by this time next year. The wait for a positive return for shareholders may be some time longer.

ISIS ASSET MANAGEMENT

Investors in Isis could be forgiven if their heads are still spinning. The detail of the company's merger with F&C is highly complex, and it is only gradually becoming clear what will emerge from the other end. The enlarged group will be the UK's fourth largest UK fund manager, but Isis shareholders are paying a high price for F&C and doubt has been cast over whether the current dividend per share is sustainable. Existing investors should take the long view and be prepared for a bumpy ride. For the prospective buyer, Isis is one to avoid while the risks are this high.

LOOKERS

Rising interest rates threaten to curb our appetite for new cars, making financing deals less appealing and making us generally feel poorer. But cars are not expensive really, with oversupply likely to keep prices low and demand ticking over. For safety's sake, though, Lookers, the Manchester-based car dealership group, spent £31m last month to acquire a parts distributor, taking it further into the higher profit, less seasonal after-sales market. Even after Lookers shares' powerful rally, there is still gas in the tank.

COFFEE REPUBLIC

Too many operators rushed to opencopies of the Starbucks format, and most retired hurt. Coffee Republic has halved the number of its shops and is moving into deli bars. Four are trading in the new format, serving scrambled eggs and bacon for breakfast, pasties for lunch, and made-to-order sandwiches all day. It sounds costly to do all this on site. Then there is the question of whether the company will get the cash to fund a proper roll-out next year. Its future is not assured. Cut losses.

INVU

Invu aims to bring the sort of sophisticated document management software that was previously the preserve of large corporations to the small business world. With projected sales growth of more than 50 per cent a year and with break-even for the first time this year, Invu ought quickly to justify its share price. Buy.

BAE SYSTEMS

Those of us who put a veil over our conscience when choosing stocks might decide that now is an obvious time to be buying a company whose products include fighter jets, naval frigates and torpedoes. But BAE Systems is struggling to recover from several years of internal problems, and there are just too many things to fear. UK defence cuts mean less work in the long term, and there could be a scaling back of orders for the first-generation Eurofighter, too. Military spending could come under pressure in the US as the presidential winner tackles the deficit. And the political situation in Saudi Arabia looks increasingly uncertain. Avoid.

BPP

The fallout from the City's post-Millennium recession is still being felt by BPP, which trains financiers and accountants. Most of its students are signed up for multi-year courses, so a slowdown in recruitment feeds through the system only gradually. The upturn, too, will be a while yet, although one City headhunter said this week that the recruitment of accountants has surged this year. BPP will have three law schools open by this time next year, an investment that has been managed despite the tough trading conditions and while being able to grow the dividend. Buy.

Invest in staples of life

The economic havoc that could be wreaked by the soaraway oil price of recent weeks is just the latest in a long line of reasons to invest in the UK's utility companies. Their wares - water and electricity - are the staples of modern life, and demand does not ebb and flow with the economic tide.

The water industry is being allowed to raise bills to fund improvements to the nation's sewers, and the companies that can make these improvements most efficiently and cut most costs in their day-to-day operations will be the ones with the most cash to hand back to shareholders.

So who might those be? Probably not Northumbrian Water, which is burdened with more debt than the average. Also avoid AWG, where the regulator is demanding very tough operating efficiencies which the company might not meet. The more efficient operators, like Severn Trent and Pennon have the most appealing mix of a cheap share price and likely dividend growth.

Northern England's United Utilities, which straddles the water and electricity sectors is worth holding for the already huge yield and the balance sheet strength afforded by its £1bn two-stage rights issue.

In electricity, we would be buyers of both Scottish and Southern Energy and ScottishPower, the former for the security of its dividend, the latter for growth prospects in the US power market.

International Power, which has just been on a buying spree of power stations, has promised to begin paying a dividend, but only a modest one, and it still looks an unappealing beast.

National Grid Transco, the gas and electricity networks business, ought to outperform the sector as it sells off its unwanted local gas pipes.

And pick of the utilities stocks continues to be Centrica which, after the sale of the AA, has enough cash pouring in from its British Gas business to pay for new power generation and storage assets and generous returns to shareholders.

The above is a selection from the daily Investment Column

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker