Monday, March 7, 2011

"We throw up our hands at the prices at the gas pump. Why not profit by owning some of the top Oil stocks?"

Dow Jones Industrial Average  12,170  (Down) Week ending 03/02/2011

$3.47, $3.54, $3.68 and outrage in Pennsylvania USA at the gas pump. Little do we know that in California, and international markets they have already been above $4.00 and $5.00 a gallon and someone told me in Amsterdam it is $8.00 a gallon.  Shame on you Royal Dutch Shell.   The threat of oil shortages from the turmoil in Africa to the supplies of Italy, France and Spain is causing a premium in the price of Brent Crude and is pulling up the average price of oil worldwide.  So what is a person to do?

How about taking some positions in Oil companies with good fundamentals that will profit from this turmoil. This would give you a hedge on the price rises. PETROLEO BRASILEIRO (Symbol PBR, $41.48) is a oil and gas driller with gigantic revenues that still trades at a current PE of 13. PBR has earnings of $3.45 per share for 2010 and next year 2012, with current oil pricing premium, probably around $3.70 per share. 5 year sales growth in the company is 13.72% and the stock price has not run up on this current oil price rise.

Devon Energy Corp. (Symbol DVN, $91.12) has tremendous numbers for growth and earnings and trades at a PE of 15.37. The 2011 earnings are a healthy $5.92 per share and projected for 2012 of a healthier $7.65 per share. 49.8% Net profit margins and a 42% 12 month total return make this a great anchor stock for a portfolio.
Helmerich & Payne Inc. (symbol HP, $63.33) trades at a PE of 16.4. HP also gives you a kicker of owning some commercial real estate.  2011 earnings of $3.92 and 2012 of $4.32 per share. 5 year sales growth of 14.51% and a 12 month Total return of 68.8% makes this a solid fundamental pick for your account. The 3 year total return of 38% and a very strong balance sheet will let you sleep good at night with this stock.

 Two other names I like here and feel confident in are Apache Corp. (symbol APA, $120.97) and Petrohawk Energy Corp. (Symbol HK, $21.80). Both have great growth dynamics and will deliver great results to help you offset your cost of rising gasoline prices.
As always,stay diversified and do not load up totally on one stock category. The oil prices will not keep going up but will settle out at a higher level than last time.US government policies towards oil drilling must change or our economy will be stymied. Of course we need all the alternate energy solutions also, including nuclear power.

We do not want to see gasoline signs that look something like this:
So ride your bicycle or pay up and drive. Own some of these stocks and hedge your gasoline bill with some capital gains.

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