The oil and gas industry does a good job of maintaining consistency while operating in volatile markets. It took a pandemic for Shell (SHEL) to cut its dividend for the first time since the second world war. 

While energy commodity markets have looked becalmed more recently, that doesn’t mean the industry has no issues. With a low oil price knocking cash flows, the majors are having to use debt to cover large buyback plans. But project spending has held up – investors are pushing for production growth.

The market has picked up on this, with buyers sending shares in project and auxiliary specialists Halliburton (US:HAL) up over 40 per cent in the past six months and Schlumberger (US:SLB) up 20 per cent. Some investors even saw the potential for intervention in Venezuela to pave the way for US services companies to repeat the gains of the Iraq war era before US President Donald Trump raided the presidential palace earlier this month. 

For London energy investors, Hunting (HTG) is the entry into this world. Rather than attempting full-service contracts or large projects (shown to be a tough game by the fates of Wood Group and Petrofac last year) Hunting makes parts used in various upstream oil assets, ranging from onshore shale to deepwater fields. 

The best performing units most recently have supplied offshore developments, which is not a surprise given the cuts to spending in the US shale industry. Big contracts have come from Guyana, where ExxonMobil (US:XOM) and Chevron (US:CVX) are spending billions on new fields, and the Middle East, including a record order from the Kuwait Oil Company (KOC). 

Hunting is large enough to handle orders such as the $231mn (£172mn) KOC deal but small enough that management has a firm hand on proceedings. It has restructured the business in recent years to reflect where investment is going in the industry, closing operations in Europe and the US and opening a new facility in Dubai.

Part of this work has been undertaken to limit the extreme cyclicality of earnings seen a decade ago. Between 2014 and 2015, the company’s cash profit fell from $272mn to $62mn as the initial shale revolution tailed off. This figure has been more consistent recently.

Last year, Hunting generated a cash profit of $135mn, which analysts see rising to $152mn in 2026. Another major KOC tender is also in the works, which could push sales up beyond current forecasts. 

As such, earnings growth has been incremental in recent years rather than explosive, but there has been serious progress since we last put Hunting forward as a buy idea two years ago. 

This has come in the form of higher sales and better cost control, leading to a larger cash pile and greater returns for shareholders. 

The cost cuts on this side of the Atlantic were unfortunately reflective of the broader energy sector, with around $11mn in annual spending saved from site closures in the Netherlands and Norway. Hunting has also slimmed down its Aberdeen operations.

“Oil companies today have too many [more attractive] places to go spend money,” said Hunting chief executive Jim Johnson, who argued that last November’s Budget had not improved the prospects for greater North Sea investment. “It’s just ridiculous to see such an asset going to waste.”

Hunting’s valuation does jump around given cash profits and pre-tax profits can swing from year to year (although they have settled down more recently), but given that the company is still valued at a discount to its net assets, we think an entry now still makes sense. 

At an enterprise value/earnings before interest, tax, depreciation and amortisation (Ebitda) ratio of around five, Hunting remains good value in our view, behind the major oilfield services companies but with enough scale to increase sales and profits in a meaningful way as the subsea spending boom continues. The dividend yield helps too, even if the recent share price rise has knocked it. 

Good oil Hunting 

Hunting splits its operations into a mix of geographic and product-based divisions. The largest operating segment in sales terms is North America, although this does not include the Hunting Titan business, which supplies the shale industry in the US and elsewhere.

The North America business generated sales of $175mn in the first half of 2025, split between its oil country tubular goods (OCTG), advanced manufacturing and other manufacturing sectors. The Asia Pacific unit, which has become critical to Hunting in recent years, brought in $154mn. 

Subsea and OCTG products had the highest Ebitda margin in the period, at 13 and 19 per cent, respectively. Hunting Titan has proved a drag on earnings in recent years, but cost cutting has seen it return to a cash profit more recently, with a margin of 5 per cent in the first half. This compares with less than 1 per cent for FY2024. 

A trading update this week pointed to further improvements within the subsea sector, with a boosted sales goal of $470mn a year by 2030 – a $220mn increase on the previous plan.

“[Subsea] is the highest margin product line we have,” said chief financial officer Bruce Ferguson. “If you look from now to the end of the decade, we’re looking at north of 20 per cent,” he added. 

The high-end target Ebitda margin is 22 per cent, compared with the group-wide goal of 15 per cent. In 2025, this margin was 13 per cent.

The margin goal is paired with the aim of $2bn in annual sales by the end of the decade. That combination is important – hiking sales merely through acquisitions is a common move for companies aiming for growth. 

Potential investors should also note management’s ambition to raise the dividend by 13 per cent a year by 2030.

If subsea is the sure-fire bet in the oil and gas space for Hunting, then the unit with the potential to surprise investors is the organic oil recovery (OOR) business. The division was originally developed by scientists to increase recoveries of oil significantly. Hunting purchased it for $18mn last year after its founders struggled to gain commercial traction.

The method is already in testing with major producers, and RBC Capital Markets analyst Victoria McCulloch said last year that “growth from the FES [subsea] acquisition and OOR businesses has the potential to accelerate the company’s margin progress [in 2026]”. The company has said OOR sales could be as high as $100mn within a few years. Ferguson said signing up would be a simple decision for producers. “It works. It’s easy to deploy. It is scalable.”

In the company’s words, OOR “manipulates the resident downhole ecology [and] offers operators an advanced tertiary oil recovery resulting in increased production, the lowering of lifting costs and significantly reducing H2S levels”.

Read our Investment Ideas of the Year 2026

In easier-to-understand terms, that ecology manipulation is achieved by adding certain nutrients into an oil reservoir that help to release trapped and residual oil. This may sound more like a small-cap pushing a breakthrough technology but the risks are low, given there is no need for significant manufacturing facilities or a large workforce to sell OOR. 

A decade ago, Hunting would have been rattled by the weakness in the oil price. But the resilience of the business and its vital role in projects being built by national oil companies and majors means it has more than weathered the current storm. It’s also a good one to have in your back pocket if oil markets wake up. 

For most of the past 15 years, Apple (US:AAPL) has been the most valuable company in the world. There were brief moments when it lost its place to Microsoft (US:MSFT) or Saudi Aramco, but it soon regained it. That was until last year when, without a compelling AI story and under pressure from legal threats, it fell decisively behind Nvidia (US:NVDA).

Last year started badly for Apple. Its hardware revenue had been stalling for a while, and then the so-called ‘liberation day’ tariff announcements sparked a sell-off in its stock. For a period, the Chinese tariff rate was raised to over 100 per cent, which would have required Apple to charge more than $2,000 (£1,492) for an iPhone to generate a profit.

Although many felt this unworkable tariff rate wouldn’t last long, no one knew how far or how fast it would fall.

It turned out that for Apple, China tariffs would be almost entirely removed within a month, as by the end of April chief executive Tim Cook had secured exemptions for the iPhone maker. However, the company was still facing structural issues, and by the summer its shares were a fifth lower than they were at the start of the 2024. This weakness is part of the reason why the shares now look attractive again.

Last year’s struggles

Even though it is almost 20 years since the first release, Apple remains heavily reliant on the iPhone, with the device making up half of its sales.

iPhone revenue growth has been largely flat over the past four years. Replacement cycles have been lengthening, with customers tending to hold on to their phones for between three and four years. This is the result of a combination of increased pressure on consumer finances and the inability of Apple to create a new phone people are excited about.

Indeed, most of the group’s recent revenue growth has come from the services business.

This includes the App Store, where Apple historically took a 30 per cent cut of all transactions. It also includes Apple Music and Apple TV, as well as selling advertising space on Apple News. On top of this, it receives $20bn a year from Alphabet (US:GOOGL) to make Google its devices’ default search engine. In the past four years, services have risen from 20 per cent of revenue to 26 per cent.

Since services sales can be delivered at a lower cost, they generate a much higher margin and now comprise 42 per cent of Apple’s total gross profit.

Last year, though, services revenue came under threat from the courts. In April, a US judge found Apple in contempt of a previous court order that forced it to allow developers to provide users to link users to purchasing options outside the App Store. After this, Spotify (US:SPOT) rolled out a link to its website where users could subscribe directly, bypassing Apple’s purchasing system. Others have since followed suit.

As yet, Apple’s services revenue has been relatively unaffected. A survey by investment bank UBS found that one in five Apple customers would never use an external link for payments, while most others would require a significant discount to consider it. The bank acknowledges that the ruling presents “a potential long-term risk to Apple”, though, as countries such as Australia and Japan adopt similar stances.

The slow iPhone growth and legal attacks, combined with a perceived lack of an AI vision, have all been a drag on Apple’s share price. In the past 12 months, its share price has risen by just 10 per cent, compared with 71 per cent for Alphabet and 36 per cent for Nvidia. In fact, over the past three years it’s been the worst performing of the Magnificent Seven stocks.

This means Apple’s shares are comparatively cheap, compared with its big tech rivals. And unlike most of the ‘Magnificent Seven’, Apple hasn’t spent billions on AI computing, which means it is still generating a healthy free cash flow. Its forward free cash flow yield of 3.5 per cent is the joint highest of the Magnificent Seven alongside Nvidia, another capital-light business.

For the past few years, the market has rewarded the companies that were placing the biggest bets on AI computing. The early consensus was that to win the AI race companies needed to have the most Nvidia graphics processing units (GPUs).

Apple declined to participate in this. Initially, that looked like a bad move, but this year the narrative could shift. Doubts are creeping in about the sums that have been spent by some of these companies.

Meta (US:META) chief executive Mark Zuckerberg tried to ease concerns during the company’s third-quarter earnings call in October, telling investors that although there was a risk of an “overshoot” on spending on AI computing power, this didn’t matter too much as there was “a lot of demand for other new things that would be built internally”.

Meta’s shares still dropped 14 per cent on the day and are down 10 per cent in the past six months. Apple, meanwhile, is hoping it has found a lower-cost way to capitalise on AI advances.

Read our Investment Ideas of the Year 2026

An iPhone resurgence?

Instead of building out data centres, Apple has focused on new product releases, including the iPhone 17, which came out in September. Its fourth-quarter earnings only included one month of sales of the new phone, but iPhone revenue was up 6 per cent year on year, and would have been higher still but for supply constraints limiting potential sales.

The new iPhone isn’t a significant departure from recent models in terms of aesthetics. Instead, most of the innovation relates to the chip powering it. Apple designs its own chips and the new phone contains a more powerful chip, the A19, which allows it to more easily run AI features such as live translation on the phone.

Apple is also investing in its own data centres, called Private Cloud Compute, but these are only used when a task is too complex to run on a phone or Mac. When iPhone users are talking to Siri the task will never need to leave the Apple ecosystem.

The hope is that this improved AI capability will encourage more customers to upgrade their hardware, rather than holding on to their older phones until they break. Broker Raymond James believes the iPhone 17 platform and the “deeper integration of GenAI capabilities” could be a “catalyst for a healthy upgrade cycle after a number of generally lacklustre years”.

Next year, Apple plans on releasing another three high-end models, including a new foldable phone, according to Bloomberg. A new AI-enabled version of Siri is expected to be launched in March.

The focus in the early part of the AI race has been on computing power, as reflected in Nvidia’s growth. However, to justify this spend, consumers will need ways to use all of the models that are being trained, and that’s where Apple enters the fray. OpenAI already knows this. It’s why the company has employed the original iPhone designer Jony Ive to create a new products team, with the ambition to build the next generation of AI hardware.

Yet Apple remains the dominant consumer electronics company, with more than 2bn customers. It is also on the brink of a big product upgrade cycle. This makes it unlikely that it will be displaced by any product that OpenAI is able to create.

At the start of last year, Alphabet was the cheapest company among the Magnificent Seven. It ended up being the best performing stock of the group. At the start of this year, Apple is in the same position. The AI story has passed it by so far, but this is the year that could change.