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Oil Stocks........Buy, Sell or Hold?
Old 08-06-2007, 11:56 AM   #1
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Oil Stocks........Buy, Sell or Hold?

If you have been holding oil stocks, you have been licking your wounds the last couple of weeks. What's your opinion of the stocks over the next 6-12 months. Hard to believe they are not a good hold for the long term, but just wanted your opinion.
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Old 08-06-2007, 12:15 PM   #2
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Hang onto them. You think India, China, et al. (let alone the US and Europe) will suddenly say, naw we don't really need to oil?
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Old 08-06-2007, 12:37 PM   #3
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Some people believe that the oil sector is a magnified version of the world economy. If the economy hums along then this sector will due quite well. If a world-wide recession hits then this sector will suffer.

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Hang onto them. You think India, China, et al. (let alone the US and Europe) will suddenly say, naw we don't really need to oil?
That's the common perception which has alot of truth to it and is probably correct. However some think that at these prices that consumption will be deterred and that prices will fall. Stay tuned for the outcome...
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Old 08-06-2007, 01:15 PM   #4
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Some people believe that the oil sector is a magnified version of the world economy. If the economy hums along then this sector will due quite well. If a world-wide recession hits then this sector will suffer.

That's the common perception which has alot of truth to it and is probably correct. However some think that at these prices that consumption will be deterred and that prices will fall. Stay tuned for the outcome...
As I read you analysis, oil is a sell, becasue if the economy slows prices will suffer; and if not prices will fall because of demand destruction caused by high prices.
Sell!!

Of course these same arguments were made at crude 40, 50, 60...

IMO, the key is supply. If deliverability is decreasing as it appears that it might be, there will be ripples and volatility, but the tide is coming in for oil and going out for a lot of other things.

Personally, when I look and see that very soon almost all the crude needed by OECD countries will be sourced from unfriendly or contingently friendly regimes that is all I need to know. What remains is choosing the right vehicles to invest, and managing exposure so that one has stamina.

Another good theme is war materiel. Tough times are on the way mes amis!
Ha
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Old 08-06-2007, 03:15 PM   #5
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As I read you analysis, oil is a sell, because if the economy slows prices will suffer; and if not prices will fall because of demand destruction caused by high prices.
Sell!!
Ha:

You are misinterpreting what I posted.

I was just going through some of the factors that will influence oil company assets. I was not making a prediction.
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Old 08-06-2007, 08:41 PM   #6
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I think I would stay the course with blue chip multi-nationals (within the top 5) if already in your portfolio. I would not buy into oils now though.

They are cyclicals (even with the China and India factors) and will have down times and good times, but the large multinationals will be less volatile than the independents.
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Old 08-06-2007, 11:29 PM   #7
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I don't have a clue, but I bought XOM in March 2007 and sold in July 2007 for about 25% gain.

For me I always struggle about when to sell, but this time I decided to lock in a profit. It was in an IRA so no ST capital gain tax bill due.

One thing I notice in my travels is that the developing world is teeming with people and they all want cars, pickups, motorcycles... Long term oil stocks are probably going to be very profitable to own, IMHO.

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Old 08-07-2007, 06:44 AM   #8
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I guess my question is how do you really determine whether or not some small independent has a shot at becoming a prominent company even in the event the price drops substantially?

When the price of oil is high, like it is now, thousands of independents flood the market like now. Some would probably drop off the face of the earth in an oil recession where to occur or be bought at heavily discounted prices. At the same time, they sell off much faster on pullbacks in oil creating bargains if the company is sound.

How do you really analyze this subsector of the oil stocks?
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Old 08-07-2007, 10:01 AM   #9
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Closed out Shell Canada for a 70% profit when Royal Dutch Shell bought it.
Still holding XOM and PCA for long term.
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Old 08-07-2007, 10:42 AM   #10
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I think a couple of the big oils should be a core holding in ANY portfolio, kind of a "no-brainer".

Keep in mind if the hybrid or fuel cell thing gets legs, the oils will buy out the technology so they can make money off that too..........

As my dad used to say: "I can use the dividends to offset the cost of the product I use, kind of like the grocery coupons your mom cuts out of the newspaper"............
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Old 08-07-2007, 10:54 AM   #11
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I think a couple of the big oils should be a core holding in ANY portfolio, kind of a "no-brainer".

Keep in mind if the hybrid or fuel cell thing gets legs, the oils will buy out the technology so they can make money off that too..........
BP is a huge player in the photovoltic market (granted, not a disruptor for cars, but an interesting energy play nonetheless).

Texaco has, as I understand it, a pretty decent battery play.

I guess I wouldn't bet against a large multi-national if their choice is between "diversify" and "roll over and die"
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Old 08-07-2007, 12:59 PM   #12
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I guess my question is how do you really determine whether or not some small independent has a shot at becoming a prominent company even in the event the price drops substantially?
I don't know that you can. I think your analysis is pretty good. Some small companies have good low cost reserves, but these may not be the companies that have big wildcat success.

It is risky to buy these things at any price other than on their backs in a glut. So it follows that vulture profits are fairly easy to make, but big scores also mean sticking with it when risks have also grown large.

Ha
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Old 08-07-2007, 01:06 PM   #13
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BTW, Ha, there is some wildcatting going on in western KY these days. Fairly small operations but there was an article about 2 brothers who made out real well. They decided the price was right and the last time they were in the game was back in the 70s. I would link the article but I would have to pay for the archived stuff -- it's about 4 months old. Hope you didn't sell any land out there that was sitting on some serious coin.
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Old 08-08-2007, 12:33 AM   #14
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Oil Stocks........Buy, Sell or Hold?
Yes.

Buy VGENX. Two years ago. Hold forever.
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Old 08-08-2007, 12:35 AM   #15
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Texaco has, as I understand it, a pretty decent battery play.
WHO?? You mean Chevron? I think you need to change your calendar.
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Old 08-08-2007, 04:05 AM   #16
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IMHO - If one made big gains in Energy over the last 4 years, it is time to lock-in some profits if one has not already done so. This might be accomplished by redeploying (most or some) of the money from that sector into an unfavorable sector that is likely to do good in the next business cycle.

I agree that the supply/demand things is going to be there. Plus Oil Energy substitutes will be slowly over the next 5 - 10 years. But at the same time, that big market for that commodity is driven somewhat by expectations rather than reality. What goes up will go down!

Remember the old saying: "Bulls make money, bears make money, pigs get slaughtered". Don't you wish you would have taken that advice in 1999 - 2000 time frame.
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Old 08-08-2007, 10:56 AM   #17
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For a mild twist on Chinaco's viewpoint:

I've broken my portfolio down into two energy components: old energy and new/clean energy (40%-60%). I currently don't have significant positions in oil (mostly holding positions in XOM, BP, and such in etfs) but have decent positions in natural gas stocks.

As my 'old energy' positions grow, they will be rebalanced into 'new energy' etfs and stocks. To my mind, this is a decent bet on positive global energy outcomes. Many emerging markets will need to use cheaper non-carbon based energy--AND they'll need lots of it. Oil and coal, I suspect, will proportionally be used more and more for products and less and less used blown out smoke stacks and exhaust pipes as CO2. Use/need for organic fuels will not go down, but will change over the next twenty years.
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Old 08-09-2007, 11:12 AM   #18
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