Wednesday tips round-up: Ashtead, Royal Dutch Shell

After rising strongly so far this year shares in rental equipment company Ashtead have came off despite the company having delivered an apparently sparkling update. To a degree that is probably down to profit-taking. From a more fundamental point of view, investors are probably asking themselves what might go wrong. The most typical worry is over-investment, of which there have been instances in the past. However, its hire fleet is now the youngest ever, as customers prefer. On the one hand, that means the firm can now reinvest for growth, instead of just replacement, and get ahead of its rivals. More importantly, Ashtead is heading into an upturn as the US ramps up for a five- to 10-year investment programme to make itself self-sufficient. Furthermore, its investments in greenfield sites Stateside have the potential to provide returns on investment of 20%-plus within a few years. At about 15 times earnings for a growth story The Times´ Tempus column said it sees no reason to sell. Hence, the recent share price fall looks like another buying opportunity. "Ashtead has manoeuvred well through the recession, and its strengths suggest further gains as the American market recovers, Buy," Tempus said. On Tuesday Shell finally managed to sell-down another significant portion of its stake in Australian energy outfit Woodside Petroleum for about $5bn after the government blocked earlier attempts to take over the entire company. Hence, the oil major´s $15bn divestment plan is now accelerating. In February it sold three North Sea oil assets and a 23% stake in a deepwater project offshore Brazil for $1bn, together with a refinery and lubricant asset in Australia for $2.6bn. On top of that, the company´s cash flow is growing just as its investment plan is due to slow down, while the current level of gearing is not an issue for Shell. Given that the price of oil is expected to be persistently high returning more cash to shareholders may be an option. Just as important, the company´s B-shares contine to trade at a discount to the FTSE in terms of its price-to-earnings ratio. "We continue to like their long term prospects. Buy," says The Daily Telegraph´s Questor column. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB