Saturday, April 17, 2010

"We need to talk about that $83.24 per barrel Elephant in the closet ...... Crude Oil. You will need to accumulate some Oil stocks."

Dow Jones 11,018.66 (UP) Week Ending 04-16-2010

Good Morning. Well we have all been enjoying this nice little rally this week, (except for that last day with the Goldman allegations and the volcano, Eyjafjallajokull, which in Icelandic means "snarler of airports"), but nobody is talking about the fact that crude oil has moved up from $55.00 to $85.00 a barrel. There are as many reasons for it to go down as there as for it to go up. But UP it goes!

I know most of you got burned in 2009 with Energy stock losses. Valero Energy and Chesapeake Energy strafed my portfolio value like a 50 caliber machine gun in year 2009. But, just like when you rode a bicycle the first time and fell off, you need to get up and ride that bike again. So I searched among the various Oil sectors for the best values and this is what I came up with.
The best value I could find is one the Chinese have an interest in as an oil source and that is PETROLEO BRASILEIRO SA (Symbol PBR, $42.28). This Brazilian oil firm has a PE of 10.44 and a 5 year growth rate in sales and earnings of 20+%. The stock is only up 28% over the last 12 months so is still a good value.
The next one is Ensco ADR (Symbol ESV, $47.18). This company has earnings growth of 53.65%. It has a price earnings ratio of 11.62 with 5 year 23.43% sales growth. Earnings per share for 2010 is $4.04, and for 2011 is $4.99 per share.

George Soros and T. Boone Pickens both own Hess Corp. (Symbol HES,$63.65) in their portfolios. When I went to look at Hess and it's peers I found that I like the numbers better for Murphy Oil (Symbol MUR, $60.20). Murphy has a five year sales growth rate of 21.92%. 2010 earnings per share is projected at $4.85, and $6.43 per share in 2011, a nice increase. I do not mention the major oil companies here like, ConocoPhillips, BP, Exxon, or Chevron because they all are projecting single digit revenue growth.

In the Oil service stocks sector I saw two that I like Cameron International Corp. (Symbol CAM, $44,75) and perennial heavyweight Schlumberger Ltd. (Symbol SLB,$65.80). Both are growing at 17 to 23% on the revenue side for the last 5 years and have very healthy multi year backlogs of work to do.

So be a wildcatter and grab one or two of these names and tuck them away for a few years in your portfolio for gushing profits.



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