With oil prices dropping dramatically last week many investors are looking to capitalize on this, and the new deal from OPEC, to buy into oil stocks and ride the recovery.
Of course if you are looking at these stocks you must believe that the oil prices will recover and hopefully won’t be dropping any lower.
Looking at historical estimates it’s quite likely that the price of oil will not go any lower and will in fact mount a good recovery, making investors in oil stocks a tidy profit if all goes well.
For example XOM has seen it’s stock drop by almost 25% in the last three years and shows more signs of continuing to drop in share price when looking at the moving average.
CVX stock is doing a little better having made some gains in the last three years. However unless you are investing money which you can afford to sit in these stocks for long term, in case oil doesn’t make a timely recovery, then also perhaps not the best bet.
One must also consider that if an investment is made in energy companies that focus on crude has their main source of fuel, then having a large long term investment may not pay off with the advent of new solar, and electricity.
While buying stocks in oil producing companies may seem like a safe bet, considering oil has likely gone as low as it will go, it may be a case to look for smaller-cap companies or producers outside the US, like CNPC.