Keeping Our Confidence in Strong Energy Stocks

Considering that there must be a buyer for every seller of a stock, there must be many brave persons in the market. Along with the market averages, three of our ten large cap buy recommendations made new 52-week stock price lows. Those three, ConocoPhillips (COP), Devon Energy (DVN) and EOG Resources (EOG) have exposure to low regional natural gas price, yet the stock price action undoubtedly relates to broader issues.

Each of the three companies is financially strong, well managed and practically sure to continue as an industry leader when business conditions improve. As for natural gas, there have been wide price swings about every two years during the past two decades. U.S. production may now be rolling over from advancing to declining, following the price decline since a year ago, thereby setting up price recovery for winter a year from now.

In contrast, gasoline is already on the upswing after steep decline, thereby helping COP’s downstream business compared to a year ago. Seeing the ups and downs over the years makes us stubborn enough to keep our confidence in strong companies while at the same time not being blind to the declining stock price trend. We don’t know when that trend will turn, but we want to be partially invested before it happens. Then we can be more positive when investor psychology as measured by stock price is in a confirmed uptrend.

Originally published on March 3, 2009.

Comments

[lance sjogren:]

"yet the stock price action undoubtedly relates to broader issues"


How about the broader issue of the plans for the Obama administration to levy trillions of dollars of new taxes on the industry, which I believe will demolish the US oil and gas industry and guarantee that no company ever makes another dime producing oil or natural gas in the United States.

You think that might have something to do with it?


What lunatic would invest in US oil or gas companies when the federal government has expressed its determination to levy astronomically large new taxes on the industr?

Are investors counting on the Republicans taking over in 2010?

Mar 24 10:21 AM

[Chirag Amin:]

Isjorgren,

Seriously, you actually stated:

'What lunatic would invest in US oil or gas companies when the federal government has expressed its determination to levy astronomically large new taxes on the industr?'

Have you ever heard of cigarettes and Philip Morris?
Have you ever heard of the concept of 'inelastic demand'?
The taxes that Obama will levy on oil companies will most definitely get passed on to the consumer.....if you don't believe it, then try figuring out why the price of cigarettes will soon be $7 a pack.....
Until you figure out a way to run your car on bullcrap, you, like everyone else will stay a slave to big oil.

Mar 24 07:05 PM