It goes without saying that the investment strategy advocated here favors integrated oil companies, particularly those with a regional or product advantage. And with the aforementioned in mind, I'm reiterating my buy rating for Petroleo Brasileiro SA (PBR), also known as Petrobras, first recommended on April 22, 2009, at a price of $32.99. If you bought PBR in April, you're up an impressive 47%.
Petrobras remains on-track for 5% to 6% oil/natural gas production growth for FY2009 or about 2.54 million barrels of oil equivalent per day; longer-term, a roughly 7% to 7.5% average annual production increase is seen for 2010 to 2013.
Add the above to, the company's dominant position in Brazil (refining, marketing), and a promising capital spending program, and PBR is not a "back up the truck" play, but it's close.
Technically, Petrobras stock chart is strong -- an uptrend, with only minor encounters with the key, 50-day moving average. The stock also recently broke through psychological resistance at $50, and a pull-back this month represents a buy opportunity.
Finally, the sell/stop loss has been raised to $33, or to just above cost, from $17. Hence, this is a zero-risk trade for your April-bought shares.
Stock Analysis: Petroleo Brasileiro SA is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in PBR now; then buy another 25% in one month, if Brazil's and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your PBR position before December 2009. Sell/stop loss if you were to buy shares in this company: $33.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
11-08-2009 @ 2:07PM
Yermo said...
Two questions for my education:
Why December 2009?
Why the stop loss @ $33 in particular? Due to its relative position to the 200MA?
see chart crosslinked here: http://www.collabinvest.net/fv-m/yermo/post/29/PBR-PETROLEO-BRASILEIRO
1-27-2010 @ 7:50AM
benjamin.lodmell said...
Petrobras is experiencing some market volatility now and it's a good time to buy. www.crinvestmentadvisors.com/blog