Is it Time To Buy Oil Stocks Again?
Investors may be confused with what’s happening in the stock market today. In addition, investors are curious about what’s happening in the oil industry, asking, “why are oil stocks going up?”
It doesn’t make any sense for a sector whose prospects couldn’t possibly look worse on paper. It also isn’t likely to perform well anytime soon amid the current pandemic.
You know what? Oil stocks are back on investors’ radars, as more gains for oil are expected in the future. The hope coming from the biotech companies over potential coronavirus treatment is a budding sign of economic recovery. This fuelled investor optimism in the market. Oil and gas stocks received another boost after it became known that the US crude glut was not growing as fast as many had feared. This lead to a 25% jump in oil prices.
While many investors still remain cautious on oil stocks, confidence in has strengthened this month. The big picture of the direction of the industry is beginning to brighten up. This came when U.S. President Donald Trump said his administration would soon release a plan to help U.S. oil companies.
“We’re saving other companies and industries…I think the oil industry is one of the top on the list.” A plan is likely to be announced “shortly.”
Donald Trump, U.S. President
With the improving outlook on the sector as a whole and the fact that oil stocks are currently trading at a huge discount, analysts are looking for the best oil stocks to buy. From refiners to oil producers, here are 2 oil stocks to watch that are gaining attention in the stock market today. But will they be the best oil stocks to buy right now?
Best Oil Stocks To Buy #1 Valero Energy Corporation
Valero Energy (VLO Stock Report) is one of the largest refiners in North America. One thing investors should note is that not all energy stocks were badly hit by the lower oil price. In the case for VLO stock, lower energy prices should be a good thing because key feedstocks can be obtained cheaply. That, however, isn’t positive enough to hold the company’s share price stable.
VLO stock fell from a high of $100 per share in January to $40 in March. This shows us that market sentiment, at that time, caused investors to panic sell anything that is related to “oil” or “energy”. The panic among oil investors did not stop there. Their heartbeat must have paused for a few beats when the WTI oil futures went into negative territory.
VLO Stock Earnings & Revenues Beat Estimates
VLO Stock attracted investors’ attention this month with the release of its quarterly report, sending its share price up 20%. Valero Energy also reported Q1 EPS of $0.34, beating the analysts’ estimate of ($0.15) by a huge margin of $0.49. Revenue for the quarter came in at $22.1 billion versus the consensus estimate of $17.77 billion. The refining throughput volumes from Valero marginally declined as compared to Q1 2019, reporting $2,087 million in losses against operating income.
Among different business segments from this company, the renewable diesel segment is the only segment that shows improved operating income within the company. The operating income reported from this segment was $198 million compared with $49 million in the same period a year ago. The increase was attributed to a rise in renewable diesel sales volume.
Best Oil Stocks To Buy #2 ConocoPhillips
ConocoPhillips (COP Stock Report) is one of the favorite oil stocks in the market right now. Why? At half the price from its one year high in January, investors find it hard to ignore the steep discount offered by COP Stock. Investors and traders see huge upside potential for the stock price when oil prices recover in the future. Here are a few reasons why COP could be one of the top oil stocks to buy now.
ConocoPhillips’ Financial Capacity To Survive This Downturn
ConocoPhillips has one of the strongest financial positions among companies in the oil sector. I have to admit, I really admire the company’s flexibility and quick-to-act response to the crashing crude oil prices by adjusting its operating plan.
The company reportedly lowered their capital expenditures by 10% and slowed down their stock buyback plan to shore up free cash flows in the company. As a result, Conoco ended last year with $5.4 billion of cash on its balance sheet and another $3 billion in short-term investments.
Oil Stocks Thrive On Project Developments and Strategic Planning
It is reported that ConocoPhillips had plans for exploration in Alaska, testing in Argentina and Norway, and continued Montney appraisal drilling. The best-case scenario for these plans is to have them slowed down for now and returned to full speed when the oil price recovers. With strong management capabilities demonstrated by Conoco as reflected from its financial strength, there is little doubt this is one of the best oil stocks to hold until oil prices recover.
Is It Time To Find Oil Stocks To Buy Right Now?
Oil stocks are hot again on the view that the market seems to be showing signs of improvement. The gradual reopening of the economy and OPEC production cuts should ease supplies. We should bear in mind that a massive glut of oil in storage will take months to burn off.
Having said that, we expect oil prices to remain subdued for a while. Many oil companies in weaker financial shape might not be able to survive this downturn. Because of that, investors should not just be looking for “oil stocks to buy”. But rather oil businesses with a robust financial position.
