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ConocoPhillips: More Than Just a Great Stock

Where do I begin....

Let's think logically here for a minute. Commodities are good diversifiers because inordinate increase in commodity prices typically means bad things for consumers and the economy and by that token stock prices and vice versa. (Think 70s, 80s and 2000s). Also, commodity prices typically follow long supply demand based cycles.

Two of the components of the commodity index are oil and natural gas. To me, it makes logical sense that the stock performance of any oil and gas E&P company (esp. in bubble periods) would tend to move in lock-step with commodity price changes. Since, we had a bubble in pretty much all commodities, we had a short term phenomenon where the fortunes of some of these E&P companies moved in sync with actual commodity prices.

Stocks prices are a function of long term cash flows while commodities prices are largely driven by supply demand imbalances. A 3% delta in returns over a long period of time would add up, not sure how it'll make a great difference here.

Remember, we got to the current crisis by assuming that the future will very much resemble the past. Analyses (if I can call it that) like this proves that we don't really learn, do we?