Argentina's YPF: A Solid Energy Pick

A subsidiary of the Argentine energy behemoth Repsol, YPF Sociedad Anonima (NYSE: YPF) deals in oil and natural gas, other petroleum products and chemicals, as well as some telecommunications services.

The last 52 weeks have been a volatile year for YPF's stock, which has ranged from as high as $64.75 to as low as $36.40. The stock is currently trading on the lower end of that range, at $42.75, but it has been climbing pretty steadily since hitting its 52-week low back in June.

This doesn't surprise me, as I think YPF is a solid bet for the future. It's a subsidiary of a huge company in a business where size matters, and it is involved at all stages of the business. Its pipelines and tankers enable it to deliver crude and refined products, and it is developing production in several places in Argentina. Its margins are improving, with its income rising faster than its sales over the past five years, and a reorganization effort that occurred in early 2005 should improve margins even further. So far, results in 2006 have shown a jump in revenues of about 10% and, even better, the company has little debt to burden it in the coming years.

In keeping with my other recent picks, YPF also offers a terrific dividend of nearly $4, giving a yield of almost 9%.

Type of stock: An energy stock with solid margins and a terrific dividend.

Price target: This stock is trading on the low end of its 52-week range, and I think it would be a safe buy at the current price of almost $43, especially with its dividend yield of almost 9%. YPF should hit $55 by the end of 2007.

YPF 1-yr chart: