Tip of the month

My tip this month is Cairn Energy, the oil exploration company, for four reasons that should see its share price hit 500p this year. Cairn is notable for its attempt to find oil in the unexplored seas off Greenland, above. It has now secured a second drilling rig for this area, which has major potential.

The company intends to drill up to four wells this summer, costing around £187m. RBS Hoare Govett estimates—through a calculation of possible results—that even a 500-million barrel discovery would
boost Cairn's share price by 150p.

The current net asset value per share is 385p, Greenland accounting for 50p. Oil should start to flow from 2015. Cairn receives a robust flow of cash from its oil discoveries and this will help finance its Greenland project.

Buy Cairn Energy at the best price and have a trailing 20 per cent stop/loss to protect you from any major downturns in the stockmarket.

Stockmarket and alternative investments can fall as well as rise in value. Readers should consult their own professional advisers.