3 cheap, recession-busting stocks!
-
Lock in Crude Profits Now
You have to love OPEC. It’s not uncommon for the barons of the giant cartel to voice their interest in seeing oil at such-and-such
a price.Recently, OPEC reiterated its desire to see oil prices at $80 per barrel. This, they claim, is the price needed to spur additional
investment in crude projects. Apparently, anything less will result in oil sitting idle in the ground.Personally, I’d like to make a million dollars a year watching grass grow. But since that particular work only yields that particular
paycheck in Jamie Dlugosch World, I spend my energy on more realistic ways to put food on the table.Indeed, despite having a ton of power, OPEC has little control over the price of crude. The real power in the oil market is
held by the trader and the ability to use massive amounts of leverage to take positions with small amounts of capital. Such a
state led to the rise to $150 per barrel last summer and the resulting crash to $30 earlier this year.
3 cheap, recession-busting stocks!
-
Oil Stocks Are Due for a Pullback
Now we see speculation in the oil pits on the rise again. In a very short period of time, and without evidence of improvements
in demand, oil prices have rocketed higher to a peak of more than $73 per barrel.Coinciding with that increase in price, stocks of oil companies marched higher as well. In a market that has traded flat to
negative for most of the year, the oil patch has been one of the best performing sectors.Certainly my own inclusion of oil stocks in my list of Top
10 Stocks for 2009 has helped the aggregate performance of that list significantly outperform the market.Some individual names in the sector are up 50% or more. That is not pocket-change folks, especially in a time when big returns
are hard to come by. As such, it makes sense to pocket our profits now.Here are five oil stocks to sell immediately…
3 cheap, recession-busting stocks!
-
Oil Stock #1
McDermott International (MDR)McDermott International (MDR) is a global oil engineering and construction company
that specializes in offshore oil and gas construction and power generation systems.Although more diversified than pure oil plays, MDR has benefited greatly from the increase in price in crude. The speculation
is that MDR will be quite busy with construction projects, as drillers are more active with the higher prices. Such speculation
resulted in a price gain of nearly 90% this year.I recommend taking your money off the table at current prices, as oil appears to be artificially high. OPEC cheating on production
cuts is likely to add supply to the market, leaving speculators rushing to close long positions.
3 cheap, recession-busting stocks!
-
Oil Stock #2
Suncor Energy (SU)Suncor Energy (SU) is a vertically-integrated oil company located in Canada. Unlike
its vertically-integrated brethren in the United States, SU is up more than 40% this year. By comparison, Exxon Mobil (XO)
is down 13%, and ConocoPhillips (COP) is down more than 20%.The reason for the big difference in performance is the weakness in the dollar. That makes Canadian-based SU more valuable to
investors. The most likely scenario in the short term is for the dollar to strengthen, which means SU will be pressured from here.I would be a seller of the stock, locking in some very nice gains for 2009.
3 cheap, recession-busting stocks!
-
Oil Stock #3
Diamond Offshore Drilling (DO)Drill baby, drill, was the calling card of the Republican Party during the last Presidential election.
With high oil prices and rising demand, finding new sources of oil is imperative. Given environmental concerns, offshore drilling
is one space that still offers meaningful potential to increase domestic supply.Diamond Offshore Drilling (DO)
operates some 45 deep water rigs that are keeping extraordinarily busy, with oil prices on the rise. The stock is up more than
46% this year, given the value of current contracts and speculation that more drilling may happen in the near future.But more drilling may be wishful thinking considering the position of the new administration. If oil prices fall in the near
term, much of DO’s gains this year may evaporate quickly.There is no shame in locking in profits, especially considering the fragile state of the global economy. I would sell DO here.
3 cheap, recession-busting stocks!
-
Oil Stock #4
Yanzhou Coal Mining (YZC)The China miracle is back on track, and with it comes speculation for resource demand as a result of huge economic growth. Within
the oil sector, the coal group has seen big gains given its use in power generation. In China, that is particularly true, with
the country seeing new power plants open on a regular basis.Yanzhou Coal Mining (YZC) appears to be in the sweet spot. Investors seem to
agree and have pushed YZC up almost 70% in 2009. China is an appealing play, but by no means certain. The country is highly dependent
on exports, and with the United States still struggling with flat to negative economic growth, the China miracle may be delayed
again.We have seen violent moves in oil and China over the last year, and there is nothing apparent to suggest that volatility will
end. As such, it makes sense to lock in gains on YZC and sell now.
3 cheap, recession-busting stocks!
-
Oil Stock #5
Chesapeake Energy (CHK)The interest in using natural gas as an alternative to crude has helped natural gas-based companies appreciate in value. Chesapeake Energy (CHK)
has benefited from that interest, with a gain of more than 20% this year.CHK is an interesting story in that during the craze in energy prices in 2008, the CEO of the company was forced to liquidate
his entire position. That forced selling created an opportunity to buy the stock at an incredibly cheap price, even beyond the
artificially low energy prices reached earlier this year.CHK has had a nice run since those lows. Taking profits here makes sense. The stock may see those gains cut in half during the
last few months of summer. I have no problem selling some CHK here.Related Articles:
