Occidental, like oil's price, is headed higher

Posted Aug 24th 2009 5:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

Did you a get chance to establish a position in oil giant Occidental Petroleum back in April? If you did, you're up about 35%, and the future looks bright.

I'm reiterating my Buy rating for Occidental Petroleum (NYSE: OXY), first recommended on April 27, 2009 at a price of $54.81.

Oil's price is headed higher, propelled by likely increasing demand in emerging markets, and institutional investors' penchant for using oil as an inflation hedge and as protection against a declining dollar.

What's more, if developed world demand (U.S., Europe) exceeds forecasts early in the global recovery, oil prices could get silly in a hurry, as in well above $100 per barrel. The First Call FY2009/FY2010 EPS estimates for OXY are $3.24 to $5.26.

Stock Analysis: Occidental Petroleum is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in OXY now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your OXY position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $32.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: Occidental Petroleum, oil, OXY