Monday, September 14, 2009

Bet on Oil?

In the October 2009 issue of Esquire includes some stock tips from Ken Kurson. Off and on throughout the years, Mr. Kurson has written a column called "The Portfoilo" in which he shares his thinking about the markets and he usually gives you a few ticker symbols to consider.
This month, Mr. Kurson focused on oil stocks and how to place your bets on the future on energy. He referenced a small global macro hedge fund called CommonWealth Opportunity capital. Here's a copy of their August letter to shareholders.
Ken Kurson sees oil going higher. He recommends a diversified approach to cashing in on this. He wants you to buy a basket featuring low risk, medium, high risk, and downright speculative stocks that will benefit from oil's upward move. I happen to agree with him so I'm recommending some picks that fit this category.

Low Risk (integrated oil giants): XOM or BP. He recommends them in the article and I agree. No one executes better. These guys don't make too many costly mistakes (see COP and CHK's bad natural gas bets). They're not going to make you rich, but there will be steady capital appreciation and a hearty dividend paid over the next few years.

Medium Risk( oil services): He likes RIG or OIH. I like Noble (NE) better because their cheaper on a PEG basis. I also like HAL or SLB. They are the consummate oil middlemen.

Higher Risk (oil sands explorers): Suncor (SU) is his pick. I'll take Canadian Natural Resources (CNQ). They smartly reduced their exposure to natural gas in 2008. It's cheaper and so I think will benefit more from the rise in the price of traditional crude. Plus, I think that PetroChina's (PTR) recent M & A activity makes it a potential target. Also, Nexen (NXY) might be a possibility.

Highest Risk (Russian ETFs): I can think of something much riskier. It's not really an appropriate long term selection, but more appropriate as a trade. If you really want to make a fortune, play the leveraged ETFs. Try ERX on for size. It's the Energy Bull 3x ETF. Need more risk, than trade the options.

As you can see, there are many ways to skin the oil bull cat.

By the way, I loved Kanye West's outburst at last night's Video Music Awards. I wish that more people in the financial world, say regulators and members of the media, has stones like his.

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