Oil is still struggling, but a base may be forming. It looked as if Texas tea might be able to build on Wednesday’s hefty 5.6% rally. Unfortunately for the bulls, though, an early spike above $51 a barrel quickly faded, and the February WTI futures contract sagged to $46.21 at 4 pm ET yesterday.
Clearly, there’s an army of doubters looking to sell on any bounce in “black gold.” (Perhaps that horde includes a fair number of desperate shale operators trying to hedge themselves?) However, we’ve now had at least one decent daily close in the green (Wednesday), and yesterday’s spike — though short lived — did lift crude to an eight-session high.
In other words, the market is slowly becoming a two-way street instead of a one-way chute into the abyss. This is how disastrous market declines eventually end.
Indeed, what’s happening right now in the oil pits reminds me very much of the behavior of the stock indexes in the first week of March 2009. We probably haven’t seen the final, absolute bottom for crude. Nonetheless, I’m beginning to smell a shift in the wind.
Among the encouraging signs for energy investors yesterday, the Alerian MLP Index (AMZ) closed with a 0.6% gain, despite losses in the broader equity indexes. Mr. Market seems to be whispering that the major pipeline operators will likely be able to manage through this period of stress without cutting their cash distributions.
In another important signal, oil-services bellwether Schlumberger Limited (SLB) announced a 25% dividend hike yesterday. I can’t imagine SLB’s directors would have voted such a large increase if they had any doubts about Schlumberger’s 2015 cash flow.
By the way, the sweetened dividend, payable April 10, raises SLB stock’s yield to a 25-year high of 2.6%. I’m a buyer in here. My long-term target for SLB is $200 before the end of the decade — and maybe a lot sooner.
Outside the oil patch, values are improving among the financials, particularly the insurance stocks. MetLife Inc (MET), one of the few top-tier insurers that didn’t cut their dividends during the financial crisis, is locking horns with the government over whether MET ought to be designated a Systemically Important Financial Institution (SIFI).
Some image-conscious institutional investors back away whenever a company challenges a government ruling in court. However, I view MetLife’s legal spat with the feds as a sideshow.
Fact is, MetLife is raking in near-record profits, even in this low-interest-rate environment. What’s more, MET shares trade at a mere 8 times estimated 2015 earnings. How many single-digit price-to-earnings stocks can you point to in this pricey market?
MET also yields 2.9% — a figure I expect to jump to 3.3% or so when MET gets around to raising its dividend in the spring.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won nine Best Financial Advisory awards from the Specialized Information Publishers Foundation.
