Where to invest in Energy
by Toddw | March 26, 2015 12:49 pm
Hi all~
I have been following a few different ideas on energy investing. Prevailing thought is it is down but not out and there are some nice dividends[1] to be had while waiting for things to gain ground.
My question is: Where? Initial thoughts were Halliburton, Chevron or a unique play in Williams Cos. Inc.
Any other suggestions or thoughts?
Thank you!
Todd
Endnotes:
- dividends: https://www.stockgumshoe.com/tag/dividends/
Source URL: https://www.stockgumshoe.com/2015/03/microblog-where-to-invest-in-energy/
I’m certainly no expert but I’d throw out two possibilities, Vanguard Natural Resources and Cheniere Energy.
No expert here either, but some of mine are energy and/or energy infrastructure: CNI (down), EXXI (up), IOC (down), NM (even), SXE (down a little), and WMB-Williams (up). But whether they’re up or down next week or next month, who knows. Just a few to consider. Also looking at some solar.
I would tell you to stay away from the major oil companies. CVX for instance made over $10 per share in earnings in 2014 and the average estimate for 2015 is $3.78. These major oil companies normally trade at around 11x earnings. XOM made $7.67 last year and is projected to make $4.20 this year and BP made over $4 and is expected to make $1.87. Most of these companies and the analysts have used $60-65 as the price of oil in their earnings models and $3.40 for the price of gas. We are now 1/4 through the year and are not close to those numbers. Earnings will need to be revised downward. Granted the majors are integrated companies and have been doing better on business refining however I do not see the market allowing a company like CVX to trade at 25x earnings. I expect CVX to trade below $90 and will actually hit $80 if we get a strong see a sell off in the general market coupled with the carnage in the oil stocks. If you want individual names I like the stocks that have gotten close to their 5 year lows like CHK, RRC, and UPL. IF you are looking for income I would look at some of the MLP funds. NTG is one of my favorites for natural gas pipeline companies and yields 7% and NDP is currently yielding 8%. I bought some NTG now and am waiting a little longer to enter NDP. Oil has been trading against the strength in the dollar. The dollar has recently sold off a bit but I see the strength continuing . If the Euro and dollar hit parity I think It will provide a great opportunity to buy a lot of names in the space. EOG, DVN, RRC, are some of my favorites.
This past year I was in BP, CVX, TOT, HAL, CNOOC, XOM, PBR, LNG, OGZPY.
Exited all but HAL in January. I would recommend all of them but PBR,
PROVIDED YOU BELIEVE THE PRICE OF OIL IS GOING TO RECOVER.
I personally suspect lower prices are here to stay but have no idea how to handicap the situation. If I had to go into the oil and gas sector, which I do not, I would also look at refiners, distributors and mid-cap guys. I like VLO, DVN.