Oil and Natural Gas Sinking with the Deflating Market (EAC, DVN)

Six-year oil futures are off 4% from the high; six-year natural gas futures are off 12% and the median stock in our coverage, 19%. As a result, it appears that short-term trends in the global financial markets are influencing stock price more than energy fundamentals.

We respect the presidential or four-year stock market cycle that suggests the weakest markets are in the second year of the presidential term. We also keep in mind the seasonal cycle that suggests the best timing for new commitments is more likely in the summer and fall rather than in the winter and spring. To take advantage of continually shifting stock prices, investors might apply the contrarian technique of adding to the stocks that have come down the most and have among the lowest McDep Ratios such as buy-recommended Encore Acquisition (EAC), Devon Energy (DVN) and Gazprom [OGZPY]. Specific risks, whether it be small cap, natural gas commodity price or emerging market, may be contained by limiting exposure to our suggested weightings (see table Portfolio Composite of Buy Recommendations).

Kurt Wulff's McDep Associates offers realtime, independent research services for investors in the energy and utilities sectors. For more information, go to www.mcdep.com or email Mr. Wulff at [e-mail].