Lightening Up on Big Oil

05/21/2010 2:49 pm EST


Jim Jubak

Founder and Editor,

I’m selling Statoil (NYSE: STO) on today’s bounce, because the euro debt crisis has changed the medium-term fundamentals for this Norwegian oil company. As I wrote in this May 21 post, as hard as it is, I think investors should try not to get caught up in panic selling during this market drop.

But that doesn’t mean they shouldn’t sell anything. The euro debt crisis will depress growth in Europe, lowering global demand for commodities such as oil and local demand for commodities such as natural gas. That means the crisis has changed the fundamentals of Statoil for the worse.

I still like the company’s long-term positioning as a natural gas supplier near gas-starved Europe, and its technology edge in exploring nearly opening Arctic waters for oil. (By the way, Norway and Brazil are, to the best of my knowledge, the strictest regulators in the world when it comes to blowout preventers. The failure of an inadequately tested and poorly designed blowout made it impossible to contain the oil flow after the Deepwater Horizon fire and explosion in the Gulf of Mexico.)

I’ve waited to sell until the record date passed for the company’s most recent dividend: Statoil will pay a dividend equal to about 95 cents a share to shareholders of record on May 19. And then I waited some more for a bounce. As of May 21, I’m selling these shares with a loss of 14% since my purchase on September 23, 2009.

I’m going to sit on this cash for a while in the belief that some time as early as this fall and perhaps as late as December, I’ll want to buy bargains in currently depressed emerging market stocks. (For more on that strategy, see this recent post.)

Full disclosure: I will sell my personal position in Statoil three days after this column is posted.

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