6 Attractive Major Oil Mega Caps

Buy recommendations ConocoPhillips (COP), Royal Dutch Shell (RDS.A), Chevron (CVX), Total (TOT), BP plc (BP) and ExxonMobil (XOM) have low McDep Ratios and are lagging independent producers in stock price. Loose talk by the two Democratic candidates for president about punitive taxes may be a factor. If so, we point out that the last Democratic president with an antioil campaign, Jimmy Carter, saw the price of the commodity triple by the time he left office after a single term.

Investors may also be uncertain about the companies’ median 20% of present value concentrated in the refining business, where product prices are rising more slowly than raw material. The more important 80% of present value is concentrated on oil and gas production where prices are in a strong uptrend. Dividends growing with inflation and supplemented by tax-effective stock repurchase exceed 5% a year compared to fixed interest on government securities that fails to cover inflation.

The illustrative McDep Energy Portfolio is concentrated 21% on the six stocks, with full weightings for each of five stocks and a double weighting for COP.

Originally published on March 11, 2008.

Comments

[Bobcheesedo...:]

Odd that Kurt mentions the oil price increases during Carter's years and neglects to mention the oil price increases during the Bush years. When people giving stock advice start dragging in the democrats (take Kudlow for example), it takes away from their credibility in my eyes. Are you giving stock advice or are you trying to swing the vote?

2008 Mar 24 05:32 PM

[JJoseph:]

Stating that if democrats are elected the price of oil will go up is difficult to understand. Fundamental issues like world fuel consumption, political havoc in oil producing countries, supply interruptions and the free-falling dollar are the main reasons why the price of oil is going up. Could any President reduce US oil consumption and raise the real value of the US Dollar ?

2008 Apr 01 03:16 PM