Crude oil prices have been getting crushed over the past few months. The decline in oil makes the stock market’s run look pretty good, with crude falling almost 35% from peak to trough after coming into October near its highs. That of course has weighed on oil stocks as well.
But just like tech stocks that get crushed when the Nasdaq Composite is under pressure, not all oil stocks should be thrown out. In fact, many of them have low valuations, large dividends and strong balance sheets.
Many investors view oil in a different light. Some view rising oil prices as a negative burden, something that weighs on consumers and hurts their purchasing power. In a way this is true. After all, think of how happy everyone is when gas is falling and we have a little extra dough in our pockets.
That said, many view oil prices as an economic indicator. That being said, as the economy continues to grow and improve, so too does demand for energy. As demand rises for oil, so does its price. Of course, it’s not as simple as that once we start considering the supply side of things — i.e., companies pumping out oil of the ground at differing rates — and then factoring in the countless political parties involved.
That side of the market can be a headache, but I wouldn’t throw out all of the oil stocks. In fact, let’s see which are worthy buys.
BP plc (BP)
While far from good, BP plc (NYSE:BP) being down “just” 10.5% from the start of October is certainly encouraging to some investors. But is it enough to pull in investors on the long side? I think so.
Let’s start with perhaps BP’s largest attraction: its dividend. Shares currently yield 6%, following