Mar 11 2009
Keep an Eye on Oil
In a market where nearly every stock is taking a pounding, there is nothing more frustrating than watching every stock you own go down. So when there seems to be a glimmer of hope to get your money moving again, it’s important to look at it. One sign of a sector turn around is in the very thing we don’t want to see go higher: oil.
A harbinger stock of this sector is Chevron (CVX) and in the past week it seems to be going back up north. It is selling for an incredible P/E ratio of 5, and has a strong dividend of 4.5%, thus making it a true growth stock on sale. Five days does not a trend make, but it is worth ringing a bell to let us know that the sector may have bottomed. The SPDR for oil, XLE also did an about face this week. Note, too, that the price of crude itself is up from a few weeks ago to over $40.
The bad news is that just as the economy begins to slowly move forward again, oil again becomes a weight around the citizen’s neck. What moves our cars is killing our wallet, and only a new solution will get our economy back on track. But since that eludes our society at the moment, there is no reason investors shouldn’t fill one pocket while the other is getting emptied. Let’s face it, oil is not a buggy whip, and it may be a while before it is.
Bear in mind that Americans are not using as much oil as they have in the past due to the price of fuel. There is no doubt that this will affect any oil company’s bottom line. The days of making a killing with oil stocks may be past. The gains may be more modest now.
With the stock market being so volatile, it might be a good time to wait just a little bit longer and see if we are uphill pattern. But if you don’t mind a bit of volatility, you could buy in to Chevron or XLE today and ride out any storm.
