Weakness in oil prices, trading around $42 per barrel this morning due to global economic fears and a real recession are creating opportunities for those with cash to invest.The volatility in the market is raising many questions among investors, and friends and acquaintances often use me as a sounding board. Hey Wally, this is a partial answer to this morning's question.
As usual I am putting my money where my mouth is, and buying. For quite some time I have been touting the value of Anadarko Petroleum (NYSE: APC). I recommended it at $40, followed it up to $80, took something off the table and today I am back in at $32.
If I would have had a real crystal ball I might have taken all of it off the table, alas, I have to settle for humbly admitting mine is sometimes on the hazy side. Crushing markets like the one we're in are a very humbling experience indeed. I did learn something from the last go around in 2000-01 and have done better this time.
The other stock I bought today was Diageo plc (NYSE: DEO) at a price of $52 per share. Actually, I was adding to my position having purchased shares last week and the week before.
I am contemplating buying more of each on dips in this wild market, but I am also pondering how focused to make my most recent portfolio. APC is in more than one, but DEO is new after watching it for quite some time. It was always just out of reach. However, after falling from it's high in the mid $90's to a low of $49.15 on a daily interim move I decided this is as good as it gets.
I wrote about DEO six weeks ago Chasing Value: Diageo (DEO) -- Drink up? My posts for APC go back a ways.
Both of these companies have strong positions in their respective markets, pay a dividend, are well managed, have good cash-flow and sell a product that is not going out of style. Neither one has to invent anything to expand their markets. APC has come down with oil & gas prices but I think the lower prices are only a temporary reprieve and that the macro picture is that both go up. DEO is producer of eight of the top twenty alcoholic beverages world wide and should have relatively stable cash-flow even in a brutal economy.
DEO closed at $53.66, up $0.64, or 1.21% and APC closed at $33.95, up $0.50, or 1.49%, both up for the day after the market reversed direction half way through the session
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of APC & DEO.
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Reader Comments (Page 1 of 1)
12-05-2008 @ 8:11PM
Mr.noitall said...
I do think the sell-off in oil has been over done. All the talk about green energy has been just talk so far, the same thing that has been going on for a long time. We need oil, the world needs oil, coal, & natural gas. Maybe it's a little too soon to jump back in and buy stock, but APC & other oil companies have certainly been better managed than financials & autos. Instead of always blasting them for "gouging" us, we should commend them for not being so incompetent that they have to beg for tax payer money.
As far as DEO goes, well I do drink, alot, but not their brands, so I won't be buying their stock at this time.
12-05-2008 @ 9:37PM
JCH said...
Mr.noitall, the oil patch thanks you for being reasonable.
APC is a fine company with a good nose for crude.