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Why I’ve Sold Royal Dutch Shell plc

Okay, I know this will be controversial, but I really have just sold my shares in Shell.

A company’s recent share price is based on its past profitability.

But its current profits are falling. Full-year profits are expected to be 23% down on last year, and the trend in profitability is clearly downward.

The sudden, sharp fall in profitability has taken me, and many other investors, by surprise.

Shell has invested substantially in gas, particularly liquefied natural gas (LNG). Yet, as more and more shale gas has been produced, the gas market has been over-supplied far more quickly than anyone expected, and gas prices have tumbled.

Some might argue that Shell’s new chief executive is ‘kitchen-sinking’ all the bad news in this quarter, but I very much doubt that this is the case. The company’s difficulties are more deep-seated and structural.

FULL ARTICLE

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