Shell's p/e demonstrating market supresion?

I can’t sit around and not buy stock, but it’s a hard task at the moment to find something interesting. So it’s ironic I’m buying Shell today.

It is perhaps some kind of condemnation of the market that a company so huge and so pivotal can have a 7 p/e and a 5% dividend.

For Shell to have these value investment style ratios suggests something is either supressing the price or that these low valuations should in fact be the benchmark for the FTSE 100, a frightening prospect at such low levels.

Oil is hardly going out of favour anytime soon, so I can’t really understand such a bargain basement valuation.

I have wondered about this from time to time and the share price has crept up as I have.

I wonder if a company this large is either held back by hedging or is just too large to be right priced by a market where liquidity has been shrinking.

Shrinking liquidity is a sign of a market that is not functioning properly. It is a sign that there is a hole below the waterline dragging on values. This can be because someone is draining money away through a loop hole.

This could well be the case but I am tempted to believe it is the money flow of the last decade, away from equities, that keeps the mammoth companies at a discount.

All things being equal the company should have a 14 p/e, so the share price should double, given enough time.

I might as well sit on that trend and park some money in Shell rather than let the cash moulder. It will be frustrating to watch it only slowly rise but until I have a better home, I may as well invest.

This will bring my latest portfolio up to 21 stocks, which is not as diverse as I like but it is diverse enough. I might limit myself to 25 for this portfolio and force myself to have a tighter focus. This higher risk will demand more of my stock picking and potentially enhance my return. This might prove necessary anyway, if I can’t find enough picks more exciting than Shell.

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