This Day On The Street
Continue to site
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

Big Oil Still Undervalued, Despite Crude Run-Up (Correct)

(Corrects story originally published July 11 to say the Exxon dividend yield is 2.7%.)

NEW YORK ( TheStreet) -- Recent rallies in oil prices will have a significant impact on broader stock values and consumer spending, made worse by this week's surge above $105 a barrel.

But with prices holding at these heights, investors should consider moving into stocks in the energy space.

Surprisingly, what makes these choices most attractive is the fact that some of the biggest integrated oil companies have underperformed relative to the S&P 500 in the last 12 months -- with some actually showing bearish performances year-to-date. With the S&P 500 gaining more than 17% during the same period, the divergence is striking.

Evidence of stronger demand and weakening supplies have been seen alongside disruptions in the Middle East, and this creates a bullish scenario for one of the market's most undervalued sector.

U.S. crude stockpiles fell again this week, with a drop of 9 million barrels. This was far larger than the 3.8 million barrel supply decline that was expected by analysts, and this sent prices to their highest levels since May of last year.

Gasoline supplies were also lower (by 3.5 million barrels), creating additional evidence that summer demand has picked-up.

This creates opportunities for investors on all time horizons, as long-term demand for oil will continue to build in emerging markets, as well.

Here we will look at three undervalued oil companies with a consistent record of profitability and strong dividend yields. These combine to offer high probability opportunities, even if oil stocks continue to stall relative to the rest of the market -- as elevated dividend payouts help offset any near-term sluggishness.

In recent years, ConocoPhillips (COP - Get Report) has gone to great lengths to streamline its operations and focus on its most profitable businesses. This puts the Conoco in an unusual position in the industry, as it directs nearly all of its efforts toward exploration.

The company has seen improvements in its balance sheet after selling some of its less-profitable businesses, with significant reductions in debt and a better allocation of resources devoted to its most successful operations.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr 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

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
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!
SYM TRADE IT LAST %CHG
BP $42.89 0.00%
COP $67.69 0.00%
XOM $86.93 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs