should I be looking at being stocks in oil companies?????

any suggestions???

 

If you plan to hold for a long time and aren't worried about further downside, then now might be a good time to start slowly accumulating stock in the major oil companies, especially if you think oil prices have bottomed and will start going higher.

Keep in mind that low oil prices mean less profit. That's one reason why their stock prices are at or near 3-5 year lows. Sure, a lot of them have really good dividend yields

BP - 7.2% dividend, but at 5 year low
COP - 6.5% dividend, but at 5 year low
CVX - 5.6% dividend, but at 5 year low
TOT - 5.9% dividend, but at 3 year low
XOM - 4.0% dividend, but at 4 year low

but a 6% dividend isn't going to help much if a stock falls another 10% from where you bought.

Oil production costs don't change much; They're mostly fixed. If, for example, a barrel of oil costs $30 to produce and the price of a barrel of oil keeps falling (currently around $40), then they're making less money right now than they were a year ago when the price of a barrel of oil was near $100. If a barrel of oil costs $50 to produce, then they'd be losing money.

To save money, they might cut their dividend (not good), lay off employees, reduce or completely stop their stock repurchase program (not good), reduce spending on projects to find or drill for more oil (no good as it hurts future growth), sell off assets, etc.

If oil prices stay low or continue to fall and you still want to invest in the oil sector, you'd be better off buying stock in refiners like HFC, VLO, TSO, and PSX since the greater the crack spread, the greater the refining margins and the more profitable they can be.

Compare the year-to-date stock performance of refiners vs the S&P 500



Now compare the year-to-date performance of the majors vs the S&P 500. They're doing a lot worse.

 

Holey moley, that is an intense reply. Thanks...