Energy Powers Navallier's Portfolio

11/19/2004 12:00 am EST


Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier is no stranger to being atop the performance ratings, and the portfolios in his MPT Review , continue to outperform, powered in large part by energy stocks. And despite the price setback in oil, his energy holdings continue to move ahead. Here's his latest.

"Oil prices are starting to settle down because inventories are being rebuilt. Meanwhile, the spectacular earnings being released by the energy stocks have caused p/e ratios to plunge and that's driving a lot of stocks. So if you wonder why oil stocks go up when oil prices are settling down, it's because earnings have come out and p/e ratios fell further. People are looking at the great growth-to-p/e ratios and realizing that these stocks will make an awful lot of money whether oil is at $40 per barrel or $45 per barrel. The outlook for energy stocks remains good, so I have expanded into more natural gas, oil shipping, and power-generating companies. Here are some of my current top energy-related stocks:

"Holly Corporation (HOC NYSE) consolidated its gains for a few weeks, but it recently rallied ahead of its earnings. Analysts have raised their earnings estimates over 19% higher, so Wall Street has very high expectations for the oil refiner. Holly is still pretty inexpensive, trading at just 9.5 times trailing earnings and at 7.4 times next year’s estimated earnings.

"Frontline (FRO NYSE) is now one of the most popular stocks on Wall Street thanks to its generous dividends. It’s always nice to see a company to share its profits with its shareholders. Since there’s a critical shortage of oil tankers, Wall Street is anticipating more great things from Frontline. Analysts have been raising their earnings estimates, and Frontline trades at only 4.1 times trailing earnings. Whether you buy the stock for its dividends, its growth, or its low price to earnings ratio, you cannot go wrong.

"Brascan (BNN NYSE) is a new addition to my Model Portfolios. The company recently bought 71 power plants in upstate New York. Brascan has more than 70 office properties and 120 power-generating facilities. The stock has been rallying steadily, and I expect that it will perform especially well this winter when power demand soars. Despite over 200% earnings growth, the stock trades at less than 15.8 times trailing earnings and is an exceptional buy.

"Knightsbridge Tankers (VLCCF NASDAQ) has been rallying with other oil tanker companies and is benefiting from the shortage of oil tankers. During the past four quarters, the company has had over 44% sales growth, and its expanding operating margins will help its future earnings grow even faster. Despite Knightsbridge’s incredible sales and earnings, it trades at less than 10 times trailing earnings and is an outstanding buy.

"OMI Corporation (OMM NYSE), another oil tanker company, is being added to my Model Portfolios. The company charters vessels to oil companies, oil traders, and government agencies worldwide. OMI is currently expanding its double-hulled fleet, and it’s also profiting from the shortage of tankers worldwide. Despite over 75% sales growth and almost 300% earnings growth in the past four quarters, OMI trades at less than ten times trailing earnings and barely seven times next year’s estimated earnings. The stock has been appreciating steadily and is still an exceptional buy.

"Valero Energy (VLO NYSE) split last month and has appreciated in a very steady manner. As the largest independent refiner in the US, Valero is operating at full capacity, and I expect it to continue to post record earnings. Valero has delivered over 50% sales growth and almost 300% earnings growth in the past four quarters, yet the company trades at less than nine times trailing earnings and barely seven times next year’s estimated earnings. The stock remains a great buy.

"Anadarko Petroleum (APC NYSE) is a new addition to my Model Portfolios, and it’s one of the largest producers of natural gas. The company has expanded significantly with the acquisition of Pacific Resources, which has boosted Anadarko’s proved reserves to 2.5 billion barrels of oil equivalent. When natural gas prices soar, Anadarko also soars. Not surprisingly, the stock has been very strong in recent weeks and should continue to rise as natural gas prices continue to rise during the winter months. APC trades at barely ten times trailing earnings and is a very good buy."

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