Energy Stocks On Sale?
The sharp drop in oil and natural gas prices has produced an even sharper pullback in energy stocks, creating what may be one of the best buying opportunities in the sector in several years, according to an article in the August 11 edition of Barron's.
Energy issues have rarely been so inexpensive, relative to oil and gas prices, estimated asset values and earnings, said the report, while adding that barring a collapse in oil and gas, most energy stocks could easily rise 25 percent or more over the next year.
Exxon Mobil, ConocoPhillips, Chevron and BP now fetch five to seven times next year's projected profits and these energy giants have rarely had such low price to earnings ratios, said the article in the weekly financial publication.
The article contends that though oil and natural gas prices have dropped in recent weeks, the stocks are discounting a drop in crude oil and natural gas that is well below current levels.
How should you play?
My best trade is XTO Energy. “The stock is down 30% since the end of June and valuations look okay,” he says. Other trades Adami likes include Schlumberger and Exxon Mobil.
I’m long Pride , Transocean and Flowserve , she says.
I like many of the stock mentioned above, he says. Look at ConocoPhillips and Exxon Mobil as well as BP.
In energy I’d duck and cover and treat them all like they’re broken, he says. However I like Potash at $150, Arch Coal at $40 and Agrium at $60.
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Trader disclosure: On Aug 11, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (COST), (MSFT), (WMT), ( TM) (UUP); Adami Owns (C), (AGU), (GS), (BTU), (INTC), (MSFT), (NUE); Pete Najarian Owns (AAPL), (COST), (HD), (TSO); Pete Najarian Owns (CSCO) Calls, (INTC) Calls, (MRVL) Calls; Pete Najarian Owns (HCBK) Puts; Finerman Owns (GS); Finerman's Firm And Finerman Own (FLS), (PDE); Finerman's Firm Owns (JCP), (MSFT), (SUN), (TSO), (VLO), (RIG), (NOK); Finerman's Firm And Finerman Own (C) Leap; Finerman's Firm Is Short (XLF), (BBT), (COF), (IYR), (IJR), (MDY), (IWM), (SPY); Finerman's Firm And Finerman Own (ANF), Finerman's Firm Owns (ANF) Call Spreads; Finerman's Firm Is Short British Pound; Finerman's Firm Is Short (RTH); NBC Universal Is The Parent Company Of CNBC