Oil Time

Well, Oil didn't fall to 10$ a barrel, so I suppose now would be a good time to load up the truck and pile some in. Let's start by throwing out some stocks that have been paying out dividends for quite a while, as there are lots and lots of potential companies to choose from so we might as well look at those that have been paying out for a while.

BP *** Yield:6.85% 5yr growth rate: 12% ANALYSTS: 2.81 hold
PE 6 PS .44 PB 1.7

SSL *** Yield:5.81% 5yr growth rate: 23.68 ANALYSTS: 1.0 Strong Buy
PE 7.7 PS 1.34 PB 2.33

CEO *** Yield:4.91% 5yr growth rate: 40%!! ANALYSTS: 1.75 Buy
PE 6.2 PS 2.2 PB 1.7

STO *** Yield:4.64% 5yr growth rate: 7.69% ANALYSTS: 2.29 Outperform/hold
PE 7.42 PS .59 PB 2.77

REP *** Yield:6.68% 5yr growth rate:20.7% ANALYSTS: 2.5 Outperform/Hold
PB 1.2

XOM ***** Yield:2.02% 5yr growth rate:8.29 ANALYSTS: 1.64 moderate buy (MSN)
PE 8.67 PS .8 PB 3.26

BPL **** Yield:9.63% 5yr growth rate:6.03 ANALYSTS: 2.34 hold (MSN)
PE 11.94 PB 1.87 PS 1.18

CVX *** Yield:3.5% 5yr growth rate:10.05 ANALYSTS 2.31 outperform
PE 6.7 PB 1.91 PS .54

Note: some of these ratios may be wrong, they are not all current, some are a week old or so.

So, we have here companies with good dividend payout histories and good growth rates on their dividends, as well as some quite attractive yields. I would like to add a rather large position in companies such as these, so it is tempting to just shotgun them rather than analyze them, however I feel that if I want to outperform the market I need to go more in depth on the companies (sigh, work).

The Price/Book ratio look tempting for many of the companies, especially REP and XOM.

CVX, BP, CEO, SSL, and STO all have PE ratios in the 6/7 range, which also seems tempting. I should probably note that the sector PE is 18... so all of these companies have low ratios.

So, next I'll pull up a chart.

First, I'll look at the six month chart to get a feel for how they dealt with the recent crash, as that seems an acid test for market confidence.

The companies seem to break into two groups, one that underperformed and one that slightly outperformed the market.

BPL, XOM, CVX, and BP, the 'big name blue chips' outperformed by a bit. (XOM and BPL by ~20%!)

The others underperformed by about 10%, and STO underperformed by almost 20%.

The two year chart tells a different story. On it, I see CEO, SSL and STO with very impressive performances. CVX and XOM also consistently preformed well, and the sector as a whole outperformed (probably having to do with high oil prices).

CVX and XOM, as blue chips with good track records, seem quite tempting based on past performance. However, looking forward a recovery by CEO and SSL seems not impossible. BP and BPL don't look that tempting based on past performance.

I noted earlier that CEO, SSL, and CVX all had low PE ratios, so these probably merit further investigation.

XOM seems like it is probably in, with the good PB & PE ratios, and historical performance, although the dividend yield and growth is kind of a yawn. I'll look into it a bit more too.

So now, time to look at financial statements... bleh. Oh well, if I want to outperform the market, I have to do at least a little thinking (or be very lucky).

Starting with CVX:
Slowing increase in revenue, but growth none the less. Nothing jumped out at me, there was debt on the balance sheet but I don't really know how much to expect- it seems to have a lower debt/equity ratio than the industry.

XOM:
Again a lower debt to equity ratio. Again, income growth over the last few years, however I don't know how much to chalk up to high oil prices. Unlike CVX, it issued rather than retired debt the last two years, which is a change from previous years of retirement. Still, nothing jumps out at me.

CEO:
Lower yet debt to equity. Did pick up some more debt the last two years, but I am lead to expect companies to use a bit of leverage in order to make profits, so I can't say I'm shocked.

SSL:
Much higher debt to equity- but this is technically a chemical/basic materials company not an oil/energy company, so the industry has a bit higher debt as a whole. Fast income growth of late, and the balance sheet shows a debt number that doesn't scare the pants off me, although perhaps it should, as the company has been picking up debt the last few years (with the exception of 2006).

Eh, what the heck, I will allocate some fake $$ to all four. I will watch CEO and SSL closely though, as they may not be able to repeat their earlier performance with today's oil situation. I have a good deal of faith in Chevron and XOM however, and I feel they help balance out the others. I would add an oil hedge, except I expect oil to return to at least 60-80$ a barrel in the long term (call it 2yrs). Maybe I should hedge short term... but I'll consider that another day.