NEW YORK ( TheStreet) -It's time once again to select our top oil stocks for the coming year. Last year saw some interesting energy developments, all of which were sidetracked by the BP oil spill -- and made predictions for the year impossible.
Barring something unforeseeable like that, however, 2011 promises to be a great year for energy, with a rising crude price and what I believe will also be a breakout year for natural gas in sharp contrast to most energy analysts out there who see natural gas as remaining flat for the coming 12 months. So, let's get to the picks.
Just about everyone has gotten on the bandwagon, calling for $100 dollar or more crude oil prices in 2011. Now, I could claim to be the bandleader, having made my call for $100 oil in the second quarter of 2011 as early as August, but the overwhelming chorus of bullish oil predictions has me a little worried now. I mean, when was the last time everybody was right at once?
Still, with investment interest in oil being fueled by a recovery that is clearly on track, industrial growth both here and in the emerging markets and a real shortage of oil services units to get to the backlog caused by the summertime BP (BP) disaster, it's tough to be bearish on the price of crude. The "risk trade" alone is enough to force crude over the $100 dollar hurdle relatively quickly. If oil is headed higher in 2011, there are obvious ways to take advantage of the trend - and no, that does not include the futures-based ETF's for oil like the United States Oil Fund (USO), probably the worst investment out there. The best way to leverage a rising price for crude is with the integrated oil companies, historically the best proxy. In that space, Exxon-Mobil (XOM) has continued to be my top pick for its best of class return-on-equity (ROE) and its underperformance compared to the other large integrated stocks. I am relying upon Exxon's proven execution of long-term strategy, 25-year history of increasing dividends and stock buyback programs to prove that it will ultimately outperform the rest of the sector.
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