The plunge in oil and the related steep sell-offs in energy stocks have provided once in a decade entry points that every investor should take advantage of. Here are Bret Jensen's top three picks poised to reward patient shareholders with big profits.
November saw the biggest monthly percentage decline in West Texas Intermediate (WTI) since December 2008 when the globe was plunging into worldwide recession.
The steep declines in exploration and production (E&P) plays remind me of the Internet bust in early 2000 where one sector of market is imploding while most of the rest of the market is doing okay.
No one knows where and when the bottom in oil prices will ultimately be just as few if any analysts were predicting an over $40 a barrel plunge in oil prices this summer. However, unless we are entering another global recession oil feels much closer to a bottom than not.
No one likes to catch a “falling knife” but if oil stabilizes and eventually rises some of the E&P plays are offering great entry points for long term investors willing to wait for normalcy to return to the oil patch. I have started to slowly and incrementally add to some positions across the sector. Let's take a look at some names that have sold off recently but feel like they are getting very oversold at current levels. Since it takes courage right now to buy anything in the energy sector, we will profile three good accumulation picks in the E&P space that start with the letter C.
Let's start with energy major ConocoPhillips (NYSE: COP). Conoco is one of the lower beta plays in the sector due to its size and financial resources. Conoco is in no danger of going bankrupt or even sustaining losses, something that cannot be said about many players in the small E&P sector, especially those firms with significant debt loads and/or high breakeven points.
A good portion of Conoco's overall production also comes from natural gas, a commodity has seen prices actually hold over the past couple of months as the price of oil has plunged. Conoco could also benefit from the recent plunge in oil prices. Prices for oil services and material (Ex, frac sand) have or will come down which will lower production costs. The company will also be able to expand its North American profile if it wants as the price of productive additional acreage is a fraction of what it would have cost just a few months ago.
