NEW YORK (Real Money) -- Oil's amazing. It's just breaking down in a way that screams deflation.
It's probably the most shocking fall of the year, and I don't know many who got this one right. But I know who got it wrong: Chevron (CVX) and Exxon (XOM) , which is why those rallies were so wrong-headed last Friday after they reported.
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I think there are three kinds of oil and gas companies right now. First there are the majors which have spent fortunes with little to show for it and are just now owning up to that. The reason we like Royal Dutch Shell (RDS.A) so much is because that's precisely the attitude it has toward its own spending.
Chevron and Exxon, to me, are still spending, and the bad news is just dawning on them.
The second group is the large independents, companies such as Anadarko (APC) , Apache (APA) and Noble (NBL) . I think these companies will represent great value eventually, but not until oil really over shoots on the way down. Otherwise they are way too treacherous, because they have no yield support.
Finally there are the natural-gas plays, namely Cabot (COG) and Range Resources (RRC) . I think these are going to suffer from number cuts despite the rally in natural gas. Our country is flooded with natural gas and the spike in price we have seen is a good place to exit.