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Dan Dicker Looks at Defensive Oil Plays

Oil prices rallied early Tuesday before dropping below $99 per barrel, leading commodities trader Dan Dicker to look for a strategy that works.

“This is a perfect discussion about what is a defensive energy play,” the president of Mercbloc said on “Fast Money.”

“The only reason that the big integrateds have outperformed here compared to, for example, the drillers or the oil service stocks is because of that dividend, because of their share buyback,” he said. “It’s been that search for yield. It’s been that substitution of oil stocks — actually a lot of stocks that pay dividends for fixed-income investments — that have kept those stocks pretty high.”

Dicker said strong stocks in the sector will be those that continue to pay dividends and have international exposure.

“That’s where all the growth is,” he said.

Dicker liked Schlumberger, Helmerich & Payne and Weatherford.

Trader Joe Terranova, who moved out of Exxon last week and Anadarko, said it was time to take some profits.

“I do think, for the first time in many months, there’s vulnerability in the spot price of oil,” said trader Joe Terranova.

His picks were Occidental and Suncor.

Trader Zach Karabell held positions in and Baker Hughes.

“They certainly have underperformed what seems to be pretty decent business,” he said. “You also feel that they don’t have a lot lower to go.”




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Trader disclosure: On Jan. 31, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS; Terranova is long LQD; Terranova is long MUB; Terranova is long EMC; Terranova is long AXP; Terranova is long JOY; Terranova is long MCD; Terranova is long OXY; Terranova is long IBM; Terranova is long SU; Terranova is long TRLG; Terranova is long CNX; Terranova is long SBUX; Terranova is long SNDK; Terranova is long GOOG; Terranova is long MA; Terranova is long UNG April $5 puts; Terranova is long AAPL Feb 430 puts; Terranova is short AAPL put spread; Terranova is short AAPL Feb 440 puts; Kelly is long GLD; Kelly is long XLF; Kelly is long KRE; Kelly is long TLT; Karabell is long IBM; Karabell is long FCX;

For Patty Edwards
Trutina Financial is long GLD

Trutina Financial is long MSFT

Trutina Financial is long INTC

Trutina Financial is long XOM

Trutina Financial is long UPS

Trutina Financial is long VLO

Trutina Financial is long MAT

Trutina Financial is long AMZN

Trutina Financial is long QCOM

Trutina Financial is long NKE

Trutina Financial is long SLB

For Zach Karabell
River Twice owns AAPL calls

River Twice is short XLF

River Twice is long IBM

River Twice is long SAN

River Twice is long BRCM

For Dan Dicker
Dicker is long SLB

Dicker is long WFT

Dicker is long HP

For Tim Seymour
Seymour owns VIP

Triogem owns MBT

For George Davis
No disclosures

For Colin Gillis
(AMZN): Investment banking (next 3 months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report.

Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Amazon within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Amazon.

For Faisel Khan
Thelma M Bardouille, Research Assistant, holds a long position in the shares of Chevron Corp.

Thelma Bardouille, Research Assistant, holds a long position in the securities of Chevron.

Thelma Bardouille, Research Assistant, received compensation from Chevron in the past 12 months.

Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Valero Energy Corp.

Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from Exxon Mobil Corp, ConocoPhillips, Valero Energy Corp.

Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Exxon Mobil Corp, ConocoPhillips.

Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from Exxon Mobil Corp, Chevron, ConocoPhillips, Valero Energy Corp in the past 12 months.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Exxon Mobil Corp, ConocoPhillips, Valero Energy Corp.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, securities-related: Exxon Mobil Corp, Chevron, ConocoPhillips, Valero Energy Corp.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, non-securities-related: Exxon Mobil Corp, Chevron, ConocoPhillips, Valero Energy Corp.

Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability which includes investment banking revenues.

For Sean McGowan
(UA): The research analyst and research associate have received compensation based upon various factors, including quality of research, investor client feedback, and the Firm’s overall revenues, which includes investment banking revenues.

For Steve Weiss
No disclosure

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