Martchev and Gue: Oil Favorites

10/24/2003 12:00 am EST

Focus:

Ivan Martchev

Editor, Vital Resource Investor and Global Viewpoints

The editors at Personal Finance are bullish on oil and have added a energy blue chip to its growth portfolio. For the more aggressive investor, they have also added a new energy pick to their Wall Street Winners trading portfolio. Here, the editors discuss their favorite oil plays.

"Conoco-Phillips (COP NYSE) is a new portfolio addition," says Ivan Martchev. "Last year’s merger between Conoco and Phillips Petroleum created the third largest integrated US energy company. And it’s well positioned for solid growth in the future. Oil represents 65% of reserves and gas 35%. Industry insiders view COP’s management team as conservative. This gives us more confidence in the success of the team’s strategic plan and restructuring efforts. The company’s steady annual dividend increases (currently at 2.9%) is one more reason to like COP. Dividends per share have grown by 4% per year during the last 20 years. Solid returns from exploration and production growth as well as from the refining and marketing business should ensure strong cash flow and earnings growth. Buy below 58."

""From a fundamental perspective, oil and gas prices have been holding up pretty well in recent months because of tight supply and solid demand," says Elliott Gue. "Technically, many stocks in this sector are starting to break higher on heavy volume. KCS Energy (KCS NYSE) is a natural gas and crude oil exploration company based in the US. It looks to be under gradual accumulation; the rallies come on heavy volume and the sell-offs on lighter volume. More recently, the stock took out key overhead resistance at around $7.75 on good volume and continues to trade above its 50-day moving average. If you're going to get into this stock, be careful as it can be a little thin and illiquid. Make sure you get in on a day when the price isn't spiking higher. And be sure to set a stop to limit your losses on the stock to 10% or 12%."

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