Transition Phase for Oil and Gas Stocks

Includes: PTR, TOT, XOM
by: Kurt Wulff

Oil and gas stocks seem well into a transition phase that we expect will lead to rising prices again. During a rising portion of the investment cycle that covered the five-year period to September 5, 2008, the date we suspended all buy recommendations, our written choices earned a total return of 29% a year in an illustrative calculation.

Current stock prices are some 30% lower than in early September, a circumstance that we believe helps justify interest in the eleven buy recommendations we have reinstated. Those low McDep Ratio picks are spread across five geographic areas, four business segments and include large cap, small cap and income stocks. Because the transition may last longer and there is always a risk prices can go lower, we are watching signs like the 200-day average to offer confirmation that a new uptrend has begun.

Hold-rated ExxonMobil (NYSE:XOM), perhaps the “World’s Safest Investment” has the best looking chart with a closing price on December 15 within 3% of crossing over the trend indicator. All the other stocks in our coverage are having a less momentous recovery, but we are encouraged that nine are now above the 60-day average, including buy recommendations Total S.A. (NYSE:TOT) and PetroChina (NYSE:PTR).

Originally published on December 16, 2008.