Hess's 68% organic reserve replacement is sub-par but most other fundamentals are favorable. In general, analysts see decent-to-good production increases, and reasonable operating costs, but the value driver here, of course, is gasoline refining, energy marketing, and retail gasoline sales (including 1,350 Hess gasoline stations). A liquefied natural gas joint venture also adds to the mix. The Reuters F2007/F2008 EPS consensus estimates for HES are $5.72/$6.24.
Hess is not as well-known or as large as its oil industry counterparts, but in the era of elevated oil prices, and barely-adequate U.S. refinery capacity, particularly for gasoline, those two data points can be overlooked. Moreover, in general oil stocks are not a defensive play, strictly speaking, but the bias here is toward adding an oil stock or two, given current market conditions, as there's little empirical evidence to suggest that the era of elevated oil prices will end anytime soon.
Technically, Hess' chart looks very good. Aside from the market's August 2007 sell-off, the stock has had only one breach of its 50-day moving average in the last six months, and has been above its 200-day moving average for about a year. However, the stock is at the top Bollinger Band at $71.60, which suggests it is overbought, short-term. Otherwise, the stock's upward trends is intact, and its p/e of 14, while not low, is reasonable given Hess' earnings growth prospects.
Stock Analysis: Hess is moderate-risk stock not suitable for low-risk investors. If you don't have an oil stock in your portfolio and you can tolerate moderate risk, consider adding HES. However, given Hess' short-term overbought status wait for a pullback to near $70 before buying Hess, if the market presents the opportunity. Investors with an investment horizon longer than 1 year should be rewarded from Hess' shares. Consider a stop loss of $49.
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