2 Higher-Yielding Oil Stocks To Buy In This Pullback

Includes: BP, COP
by: Hawkinvest

The stock market has dropped sharply since the election and most major indexes are now down about 5%. Some energy stocks have been hit even worse because of a sharp drop in the price of oil. Investors who have been waiting for a correction before buying now have a chance to pick up cheap shares in some of the industry leaders. A few weeks ago, many stocks were hitting new 52-week highs, but now some investors are scared to buy due to concerns over the fiscal cliff and the European debt crisis. While these are valid concerns, and since the stock market could go lower, it is tough to be a buyer but that is often when you get the best deals in the stock market. It's hard to say exactly when oil stocks will rebound, but with all the money printing going on in this world, constant tensions in the Middle East, and growing demand for energy in emerging market countries, it makes sense to use significant pullbacks to buy high-yielding oil stocks like these:

BP plc (NYSE:BP) shares have actually held up better than some of the major U.S. oil stocks in the recent market correction. Even so, the stock has declined from about $43.50 to around $40, which makes it worth considering now. BP has been making progress on resolving claims relating to the oil spill in the Gulf of Mexico and it recently agreed to pay a $4.5 billion fine to the U.S. Government. For the past couple of years, the company has needed to sell some assets in order to pay for the spill liabilities but that phase appears to be coming to an end. This means that BP could really begin to focus on growth, instead of asset sales for the first time since the spill. Another recent positive is that BP has resolved all disputes with a joint-venture partner in Russia and this allows both companies to move forward with new opportunities in Russia and the Ukraine. With the stock now trading at about 8 times earnings, and offering a yield over 5%, it makes sense to start accumulating BP shares on this pullback.

Here are some key points for BP:
Current share price: $40.16
The 52-week range is $36.25 to $48.34
Earnings estimates for 2012: $4.95 per share
Earnings estimates for 2013: $5.20 per share
Annual dividend: $2.16 per share, which yields about 5.3%

ConocoPhillips (NYSE:COP) shares were recently trading near $59 but have declined by about 10%, and now trade for just over $54. This looks like a solid buying opportunity especially since it is currently trading at a key support level. The 200-day moving average is $54.73, so the shares could see strong support around current levels. After a near 10% drop in just about two weeks, the stock is now also oversold and it could be poised for a rebound. Since ConocoPhillips completed the spin-off of its refining division earlier this year, it is now more focused on the exploration and production of oil and natural gas. The refining business now trades as Phillips 66 (NYSE:PSX). Thanks to the market sell-off, ConocoPhillips shares trade for just about 9 times earnings and it yields nearly 5%. The average stock in the S&P 500 Index trades for around 14 times earnings and yields just over 2%, which makes ConocoPhillips a stock worth buying on this dip.

Here are some key points for COP:
Current share price: $54.59
The 52-week range is $50.62 to $78.29
Earnings estimates for 2012: $5.84 per share
Earnings estimates for 2013: $5.84 per share
Annual dividend: $2.64 per share, which yields nearly 5%

Data sourced from Yahoo Finance. No guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial