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I’m Interested in Oil Stock

As long as the majority of oil comes from outside of the country I believe oil stock is going to rise. One factor is we are definitely monetizing the debt in the US right now (don’t even deny it) and this will reduce the US dollar against other world currencies. If our money is worth less then the price of oil will go up. Also, regardless if our use of oil rises or drops OPEC is going to fix the price of oil, maybe even fix the profit per year from oil. If they do get the economy churning again (which I think we will) then our oil use will rise with a still falling dollar making much higher oil prices.

One oil stock I like is Valero Energy Stock Ticker: VLO

Even at today’s low prices the stock has gained an average of 20% per year for the last 20 years. That is pretty freaking amazing I don’t think most people’s mutual funds have done that well through the boom and bust cycle.  My only real concern is the growth rate.  If it’s not sustainable the stock could sit idle a bit longer especially with its variable positive/negative cash flow and earnings per share.

Logarithmic Chart VLO

I think the best oil stock out there right now is Stock Ticker: SII or Smith International Inc.  I particularly like this stock because they make their money in drilling equipment, waste management, and supply chain logistics for the oil drilling industry.  So regardless of oil stock prices this company has the potential of doing well.   If oil prices are high then the oil companies will have more money in invest in drilling equipment, if it’s low then demand will go up and more drilling equipment will be needed.  It’s a win win with their consistent increase in dividend payouts and improved earnings per share.  If you look at the chart SII has consistently bounced back from steep drops, just a nice repeating pattern.

Logarithmic Chart Sii.jpg

I know these are some crude oil stock picks.  (Ha Ha get it?)  I just wanted to show a stock pick still using my usually CAGR screening, but with some more ties to current affairs.  We’ll see how my current event analysis works out.

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This entry was posted on Wednesday, September 23rd, 2009 at 8:00 pm and is filed under Stock Pick of the Day. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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