This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Energy Stocks Should Be Your Summer Fling

Stocks in this article: CVX BHI ECA SDRL APA

NEW YORK ( TheStreet) -- Energy has lost its mojo. No one seems to care anymore about gas prices and the threats of an Iranian nuclear program. But you ignore energy price action at your own risk -- it's delivering some of the best indications of future stock prices, and telling me it's near time to start developing some positions in energy stocks.

It's been impossible to recommend any stocks confidently in the past several weeks, considering the news from Europe. But those headlines are eerily similar to those we saw from the summers of 2010 and 2011, and we should be used to them. Is the Greek debt crisis and EU negotiation any direr than in the previous two years? Probably not, and the result from those previous two summers on the equity markets has been the same: Whether the fix is temporary or not, a plan is put into place eventually to support the solvency of every member of the EU, and stock prices have found a bottom.

If this summer proves similar to the past two, energy stocks could soon start pumping out good returns for investors.

In energy, the pattern has been similar with one important difference: Since 2008, the lows made during each consecutive summer have been consistently higher than the previous year. In 2010, after the BP (BP) Horizon disaster, crude bottomed at $68. Last year, in the aftermath of the Japanese earthquake, crude found a low of $78. This year I am expecting a low to be reached somewhere in the mid $80s or perhaps just south of $90. With crude oil sitting around $92 a barrel (and acting rather poorly), I am starting to look at some of the oil stocks I've avoided for weeks and trying to find some levels to begin adding shares to my portfolio.

There's a lot of value in the energy space right now, and a lot of good choices depending on your tolerance for risk. Even the simplest dividend play, such as Chevron (CVX - Get Report), down to $100/share and delivering 3.7%, is a safe place to start. If you have more risk tolerance, you might try a dividend natural gas stock such as EnCana (ECA - Get Report), paying more than 4%. Even more of a shooter? You might want to look at some of the recently pummeled midcap exploration and production companies such as EOG Resources (EOG), Noble Energy (NBL) or even a multinational E+P such as Apache (APA - Get Report), now selling for less than 6 times future earnings.

In the oil services sector, one of my favorite stocks, Baker-Hughes (BHI - Get Report) is again reaching the line in the sand I normally draw for its value level. I've had great success buying shares around and below $40, and shares of Baker-Hughes are again hovering just above this level. In offshore drilling, Rowan (RWN) is again nearing a value $30 a share, and even big-dividend SeaDrill (SDRL - Get Report) is nearing the level where it started the year, well before the crude oil market began the stellar rally that petered out just three weeks ago.

There are a lot of cheap-looking energy stocks out there, but patience will be a virtue. More downside is likely to be seen in crude oil, and therefore the final bottom in these issues is probably yet to be seen.

But despite all the doom and gloom being discussed in Europe, now is a good time to begin wading slowly back into energy stocks. If this summer proves similar to the past two, you might be looking at a terrific opportunity.

At the time of publication, Dicker owned Encana and Chevron, but positions can change at any time.

Dan Dicker has been a floor trader at the New York Mercantile Exchange with more than 25 years of oil trading experience. He is a licensed commodities trade adviser.

Dan is currently President of MercBloc LLC, a wealth management firm and is the author of �Oil�s Endless Bid�, published in March of 2011 by John Wiley and Sons.

Dan Dicker has appeared as an energy analyst since 2002 with all the major financial news networks. He has lent his expertise in hundreds of live radio and television broadcasts on CNBC, Bloomberg US and UK and CNNfn.

Dan obtained a bachelor of arts degree from the State University of New York at Stony Brook in 1982.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,387.21 -291.49 -1.65%
S&P 500 2,029.55 -27.54 -1.34%
NASDAQ 4,681.4970 -90.2660 -1.89%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs