The oil stocks I’m reviewing today are the best in the industry. And I’ve already bought two of them. Both positions are in the red but I’m playing the long game. After oil prices have dropped to historic lows, these are some of the best value stocks to buy now. The 2020 market crash – which I predicted last year – is giving us better buying opportunities.
Now, let’s get this out of the way… other energy sources will replace oil and fossil fuels. I’m looking forward to that future. I want renewable energy to become more cost effective faster. Although, investments shouldn’t be based on hopes and desires.
Looking at the data and trends, oil will continue to be a top source of energy for the next few decades. During that time, the best oil businesses will continue to produce big cashflows. Sure, it’ll be tough in the short-term. Some oil companies have already started cutting buybacks and Capex spending. Additionally, the coveted oil dividends aren’t looking as safe.
Still, with my money on the line, I’m not worried. The short-term swings are creating better buying opportunities. I might double down soon. Let’s dive in…
Top 6 Oil Stocks Trading at Low Prices
The stock market has recovered some of its losses. It’s up 27% from recent lows. And oil stocks have rebounded a bit as well. Although, they’re still down big…
- Exxon Mobil (XOM) is down 46% in the last year.
- Chevron (CVX) is down 26%.
- BP (BP) is down 47%.
- ConocoPhillips (COP) is down 44%.
- Royal Dutch Shell (RDS.A) is down 45%.
- Total (TOT) is down 38%.
These energy companies are called the Supermajors. They’re some of the largest publicly traded companies in the industry.
After the recent drop, their combined market cap comes in at $690 billion. And in 2019, they had combined revenue of over $1.2 trillion. That’s trillion with a T! Although, oil businesses are capital intensive. They have lower profit margins than some other industries.
On top of that, lower oil prices are squeezing profit margins even further. But these big players should be able to weather the storm. And for the small oil companies, not so much.
Too many of them have overleveraged with debt. And their cost of oil production is higher than the Supermajors due to scale. Some have already started to go bankrupt and more will follow.
Though, there’s a silver lining. As the small companies go bankrupt, they will have to sell their assets at deep discounts. So, the top oil companies can pick up great bargains. They’re prioritizing areas with the lowest costs of production.
As the economy emerges from this self-induced recession, oil demand will climb once again. It might take a few years but supply and demand will balance out. And I’ll be along for the ride.
As always, do your own homework before jumping into these oil stocks. They might be some of the best stocks to buy in 2020. Although, only time will tell. So, pay attention to not only the potential gains, but the risks as well.
To lower the potential of big losses, you can spread out your investments. Warren Buffett has called diversification protection against ignorance. Although, Buffett accepts his ignorance. To see why, check out that research.