While other earnings may have disappointed last week, the news was good for oil giant ConocoPhilips (NYSE: COP). In what some took as a good sign for big oil, the Houston-based company reported that third quarter net income surged 41% year over year to $3.39 per share, and that revenue also surged 52% to $70 billion. We'll see whether the good news extends to other petroleum giants scheduled to report quarterly results this week.
Analysts surveyed by Thomson Financial are looking for BP (NYSE: BP) profits to have grown 43.2% in the most recent quarter to $2.34 per share on revenue of $109.7 billion, and Chevron Corp. (NYSE: CVX) to post earnings up 39.4% to $3.25 per share on revenue of $86.8 billion. Marathon Oil Corp. (NYSE: MRO), ExxonMobil Corp. (NYSE: XOM), and Royal Dutch Shell (NYSE: RDS.A) likewise are expected to report higher net income of $2.33 per share (sales of $23.4 billion), $2.40 per share (sales of $131.4 billion), and $2.65 per share, respectively. Even Valero Energy Corp. (NYSE: VLO) is expected to post earnings slightly higher to $1.46 per share (sales of $36.4 billion), despite the effects of Hurricane Ike. Among these companies, only BP and Valero beat earnings expectations in the previous quarter. Not surprisingly, analysts on average recommend buying all except Valero, and shares of all of these companies have recently hit 52-week lows.
The energy debate rages on as oil and gas futures bounce around with 30% corrections. Which side of the energy debate are you on? Bears say that oil and gas prices are coming back down to earth. Speculators and hedge funds bid them up, global demand is slowing and alternative forms of energy will soon replace the fossil fuels we've come to depend upon. Bulls argue that oil and gas supplies are dwindling at the same time that the emerging market economies (China, India, Brazil and 20 others) need more. As their middle class population builds they too will want cars, air conditioning and electricity and demand will increase. Most oil reserves are in countries with unstable governments and when geopolitical events get ugly, prices tend to skyrocket.
I'm a long term energy bull -- 10% of my money has been in energy stocks for the last several years and today I maintain that allocation for two reasons. First, I believe in five years, oil and gas prices will be higher than they are today. Second, owning energy is a great hedge against other asset classes like stocks, the US dollar, and inflation.
No one knows which way energy prices will go next week or month so I continually rebalance my portfolio. As my energy stocks rise, I trim them and when they fall, I add to them. If my portfolio goes to 12% energy, I sell them back down to 10% and vice versa.
Now comes the easiest part – which stocks do I pick? Easy you say? Yes – because I don't worry about stock picking due to a miraculous new invention I'll discuss below. I own three energy stocks: the U.S. Oil & Gas Exploration & Production Index (NYSE:IEO), the U.S. Oil Equipment & Services Index(NYSE:IEZ), and S&P Global Energy (NYSE:IXC). Through these three stocks, I own about 200 energy stocks in precise allocation percentages to parts of the energy sector, weighted according to my own preferences – 60% is in IEO, 30% is in IEZ and 10% is in IXC. Why pick stocks when I can own them all? Here's what I mean.
It really shouldn't come as too much of a surprise that the company was able to rake in strong earnings considering just how high oil prices were during the fourth quarter. Occidental had been expected to show earnings this morning of $1.69 and surprised Wall Street with actual earnings of $1.74.
For the full year, the company posted its strongest ever yearly numbers. The full year profit came in at $5.4 billion, which is 28.9% higher than the $4.19 billion profit that the company realized in 2006.
TheStreet.com's Jim Cramer says names in this group are now trading vehicles, not long-term investments, but that doesn't mean they're any less critical to own.
Here we are again in the weeklong pullback in oil where the stocks all get thrown out and no one wants to touch them. We will soon hear from the chartists (as I call technical analysts) that these stocks were unable to take out their highs, or they are getting the right -- and cold --shoulder.
Citigroup upgraded US Steel Corporation (NYSE: X) to Buy from Hold and raised their target to $118 to reflect operating catalysts and their expectations for domestic steel markets to improve in Q4 and 2008.
Cooper Companies Inc (NYSE: COO) was also upgraded to Buy from Hold at Citigroup despite the lowered guidance as they believe the company's products are improving and earnings upside is possible.
WestLB upgraded Continental AG (OTC: CTTAY) to Buy from Hold after the tire marker announced plans to reorganize its company structure into six divisions following the purchase of Siemens AG's (NYSE: SI) VDO automotive unit.
MOST NOTEWORTHY: Linear Technology Corp (LLTC), Anheuser-Busch (BUD), Best Buy (BBY), Bankrate (RATE) and Ensco International (ESV) were today's more noteworthy downgrades:
Linear Technology Corp (NASDAQ: LLTC) was cut to Sell from Neutral at Merrill citing slowing revenue growth and valuation...
AG Edwards downgraded Anheuser-Busch (NYSE: BUD) to Hold from Buy on valuation...
Goldman said Best Buy's (NYSE: BBY) fundamentals remain at risk after the Q1 report and cut shares to Neutral from Buy...
While other earnings may have disappointed last week, the news was good for oil giant ConocoPhilips (NYSE: COP). In what some took as a good sign for big oil, the Houston-based company reported that third quarter net income surged 41% year over year to $3.39 per share, and that revenue also surged 52% to $70 billion. We'll see whether the good news extends to other petroleum giants scheduled to report quarterly results this week. 
The energy debate rages on as oil and gas futures bounce around with 30% corrections. Which side of the energy debate are you on? Bears say that oil and gas prices are coming back down to earth. Speculators and hedge funds bid them up, global demand is slowing and alternative forms of energy will soon replace the fossil fuels we've come to depend upon. Bulls argue that oil and gas supplies are dwindling at the same time that the emerging market economies (China, India, Brazil and 20 others) need more. As their middle class population builds they too will want cars, air conditioning and electricity and demand will increase. Most oil reserves are in countries with unstable governments and when geopolitical events get ugly, prices tend to skyrocket. 
Oil and Gas giant 
TheStreet.com's Jim Cramer says names in this group are now trading vehicles, not long-term investments, but that doesn't mean they're any less critical to own..gif){kind=logo}
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Chasing Value: Ten stocks for 2010 -- Part 2
