Forget Bitcoin! I’d rather invest in the Premier Oil share price today
Peter Stephens | Wednesday, 23rd January, 2019 | More on: GPOR PMO
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While Bitcoin’s 80% fall since reaching a record high in late 2017 has been hugely disappointing, other assets have also experienced tough periods of late. Premier Oil (LSE: PMO), for example, has recorded a decline of 50% since early October, with a falling oil price the key catalyst behind its slump.
Although Bitcoin may continue to post declines as a result of weak investor sentiment and its lack of fundamentals, Premier Oil appears to have recovery potential. As such, it may be worth buying alongside another struggling FTSE 250 share which released a positive trading update on Wednesday.
Improving outlook
As mentioned, the Premier Oil share price has experienced a difficult period. It has, though, seen a partial recovery in recent weeks. The oil price has gained ground as investors have become less bearish about its prospects. This has helped to push the company’s shares higher, although they are still down by over half since early October.
Of course, the oil and gas sector is volatile, and wild swings in share prices are nothing new. Investing in any related stock therefore comes with a high degree of risk, since their profitability is highly dependent on the price of oil. And with geopolitical situations within a number of OPEC countries best described as ‘fluid’ at the present time, it would be unsurprising for major price movements in oil to continue throughout 2019.
Against this backdrop, Premier Oil may appear to be an unappealing investment. The company, though, has a price-to-earnings (P/E) ratio of around 3, which suggests it currently offers a wide margin of safety. With further debt reduction set to be delivered, the stock could offer an enticing risk/reward opportunity that makes it more appealing than Bitcoin over the long run.
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned.