Oil Services Holders Trust (OIH) closed down 1.8% as WTI crude oil futures sold off 1.91% to $96.23, according to Bloomberg. March and April put option implied volatility of 31 is near its six-month average of 30, according to Track Data, suggesting non-directional price movement.

PetroChina (PTR) overall option implied volatility of 34 is above its 26-week average of 31, according to Track Data, suggesting larger price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

We at BloggingStocks and everywhere else make the full gambit of prognostications, suggestions, predictions, guesses, analogies, and so forth in an attempt to improve potential investment opportunities for all our readers and provoke discussion.

All of this has its limits, but, if you are a fan of Professor Nassim NicholasTaleb and his best seller The Black Swan then you already have been warned that the events that have the greatest impact on our lives and our investments are most often unpredictable. We cannot predict the future nor can we anticipate the tragedies that will tank our portfolio's.

While I do believe predicting the future is, how should I say, futile, there are general clues as to which way the wind blows.

Until recently, my largest positions were in financial stocks Citigroup (C), Wells Fargo (WFC) and Bank of America (BAC). As a contrarian investor, I do buy on fear and sell on greed as "my pal Warren" has advised for many years. This has worked out to be very profitable over the past 18 months. However, in the past 30 days the financial stocks have dropped to second place in favor of oil and gas stocks.

I think the economic recovery is moving at a snail's pace, lowering anticipated demand for oil while gas was already depressed based on the same factors and the addition of numerous new large supplies. Add to this the mess in the Gulf of Mexico and the public's already negative sentiment about oil companies and you have the makings of depressed pricing in the sector.

Stories are starting to appear that "my pal Warren" is gearing up for a major foreign acquisition. One of my dear friends Randy S. is taking a post graduate business class at UCLA where this issue is a part of the course. He is supposed to figure out what non US companies Berkshire Hathaway (BRK.A/BRK.B), led by Warren Buffett, might be considering for investment.

Ahh yes, the prediction business, quite tricky indeed. Starting with some basics, in most cases I would stick to the time tested philosophy that past performance is not an indicator of future success. That said, I think in the case of Buffett, it does. There are many clues along the trail based on his past performance.

Here are some basic consistencies from the existing portfolio that I would expect to hold true going forward.

The twelve super caps are down to seven: Proctor & Gamble, Wal-Mart, Johnson & Johnson, China Mobile, PetroChina, Microsoft and ExxonMobil. Five are American companies and two are Chinese. The five U.S.-based enterprises have historically strong management teams and balance sheets. If this was the only criteria, I might take pause when considering the two Chinese companies only because I do not know enough about them to make a judgment, except that they have been very successful.

"My pal Warren" placed a large bet on PetroChina (PTR), which he has since sold off, but he always makes a big deal about management, so we will give these two the benefit of the doubt. The two also pay the highest yields among the group.

So where do we stand today? We'll stick with all seven and here is why.

The market continues to be very volatile and trending down. When the seas are this turbulent you want to be on the biggest ships and thus I continue my review of the super cap stocks. This time, I'm going to examine return-on-equity (ROE) and return on-invested-capital (ROIC).

I started with the 12 highest valued companies but remained with 10 after running them through several screens. Among those 10 super, caps the company that is producing the highest returns is Microsoft (MSFT).

It's a cliché but it rings so true: just show me the money! In the case of stocks that's profits and distributions, or dividends.

The super cap review, in which I examine large cap stocks through different valuation methods, started with the 12 stocks with the highest capitalization and through several stock screens has been trimmed to just 10 stocks.

It has been widely reported that dividends contribute as much as 40% of the market stock appreciation on long term holdings. All things being equal, a diversified basket of dividend paying stocks should outperform a similarly diversified portfolio that does not.

Over the years I have referred to "my pal Warren" (Warren Buffet) on many occasions. He has taught me a great deal. I have learned a few things from Sir John Templeton (RIP) as well. But when I think about the price-to-earnings-to-growth (PEG) ratios, it is Peter Lynch who stands tall.

Lynch has been retired for many years and has been generous enough to share some of his thoughts in a couple of worthy books: One Up on Wall Street and Beating the Street. I highly recommend these best sellers to anyone that wants to expand their knowledge of value investing or manage their own finances.

In my search for value investments among the top twelve stocks by capitalization -- the "super caps" -- I began by reviewing the price-to-earnings and price-to-sales ratios. Today we will move on to examine price-to-book (P/B) and price-to-cash flow (P/CF).

If you are one of the lucky ones that benefited from the market's long rise from the depths of Hades and are now looking to rotate into less volatile positions, or you still remain apprehensive and want to stake out a new position, some of these super caps may be just for you.

Since early last fall, the majority of pundits have been saying that there would be a rotation from small cap stocks to the safety of large cap stocks in the new year. So far, the small cap stocks have maintained the lead, but a shift is taking place and the longer the bull runs and the worse global news becomes, the more this is likely to continue.

I have decided to examine the largest of the large cap stocks; lets call them the "super" caps; the top twelve as of May 13, 2010. Over the course of this series, the order will change and the bottom few may fade in and out as the market activity dictates. I may update the order, but for simplicity's sake will not change the stocks from the current list.

China Mobile (CHL) closed at $48.01. CHL February put option implied volatility is at 24, June puts are at 30, versus its 26-week average of 33, according to Track Data, suggesting decreasing price movement.

China-Unicom (CHU) closed at $13.04. CHU February option implied volatility is at 33; April is at 37; below its 26-week average of 50, according to Track Data, suggesting decreasing price movement.

PetroChina (PTR) closed at $130.51. WTI Crude Futures are recently up 1.40% to $83.91 according to Bloomberg. PTR February put option implied volatility is at 31, March puts are at 30; below its 26-week average of 37 according to Track Data, suggesting decreasing price movement.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

They say you should buy low and sell high, which is easy to say but hard to do. How low is low and how high is high?

Sometimes technical support and resistance levels can be helpful in finding those highs and lows. Right now oil stocks like Exxon Mobil Corp. (NYSE: XOM), PetroChina Company Ltd. (NYSE: PTR) and Chevron Corp. (NYSE: CVX) are just bouncing off support that may be the "low" many traders are looking for.

CNOOC Ltd (NYSE: CEO) closed at $134.02. WTI Crude Futures are recently up 2.35% to $67.87, above a level of $49 in late April according to Bloomberg. CEO June option implied volatility is at 49, July is at 47; below its 26-week average of 64, according to Track Data, suggesting decreasing price movement.

PetroChina (NYSE: PTR) closed at $116.29. PTR June option implied volatility is at 47, July is at 44; below its 26-week average 60, according to Track Data, suggesting decreasing movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

This post is part of a 12 articles feature on the best bets for investing in China. To see all the other recommendations in this special report, click here.

"Amidst all the concern about the U.S. economy and stock market, investors may gain some solace, as well as profits, by looking east-to China, where there are signs the huge government stimulus is bearing fruit," explains Stephen Leeb.

In The Complete Investor, he adds, "For income investors, it makes good sense to own carefully selected dividend-generating Chinese securities such as PetroChina (NYSE: PTR) and China National Offshore Oil Corp. (NYSE: CEO).

Here, the growth and income advisor reviews the two Asian energy plays.

Those surprised by the market's strength in recent weeks should be even more impressed with the rebound in China, where both their market and economy have proven among the most resilient in the world.

Global specialist Nicholas Vardy adds, "While the US markets are rising, Asian stocks are on fire." ETF expert Paul Tracy adds, "China funds have screamed to the top of the performance charts."

In large part, this strength is due to the country's stimulus program. Tracy points out, "To combat the sagging global economy, Chinese Premier Wen Jiabao orchestrated a massive 4 trillion yuan ($586 billion) stimulus package.