As prices at the gas pump begin their later-if-not-sooner return to the stratosphere, you can sit there and lament, or you can own Hess (NYSE: HES). Hess is an integrated oil and gas company with proved reserves totaling 1.4 billion barrels of oil equivalent. Hess also sells gasoline through about 1,400 gas stations, primarily in the eastern U.S.
The market punished HES's shares after oil prices collapsed in 2008, driving shares from about $147 to $35.50, and the view from here argues that selling was way overdone. Further, Hess' substantial East Coast gas station presence is not an insignificant factor: this is not a new business model in an experimental market.
Hess is vulnerable if U.S. gasoline demand does not pick up in the second half of Q2, but with "green shoots" in the U.S. economy surfacing, and a p/e of about 8, the risk return is favorable for investors who can tolerate moderate risk. The First Call F2009/F2010 EPS estimates for HES are 7 cents / $2.50.
Stock Analysis: Hess is a moderate-risk stock. Consider buying a 25% position in HES now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your HES position in the first half of 2009. Sel /Stop Loss if you were to buy shares in this company: $32.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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