Overstone International Value Fund on Shell plc
Thesis
Shell has benefited from Brent crude rising approximately 40% during the quarter amid Middle Eastern supply disruption. The fund considers the company inexpensive despite its recent share-price strength. At a medium-term oil assumption of $80 a barrel, Shell trades on a low double-digit free cash flow yield. Its cash generation and valuation underpin the continued holding.
“Shell and BP trade on low double-digit free cash flow yields.”
Key risks
- The company remains exposed to conflict-driven oil price changes.
- A retreat in Brent could reduce cash flow.
- Normalization in constrained energy supply may erode the current earnings backdrop.