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 Oil Stocks Are Ready To Rebound… by Justin Bennett, Editor No doubt about it, the S&P 500 is having a great run. Even if you factor in the recent correction, the widely watched index is up a hefty 11.4% since the start of the year. That's an incredible four-month rally no matter how you slice it… But as impressive as 2012's broad market performance has been, there's one industry that's been lagging behind… oil exploration and production (E&P). -------------Sponsor------------- "Frackin' Unbelievable!" Three Brazen Big Wigs -- spanning the political divide -- probably thought they'd keep the multi-million-dollar spoils to themselves... Find out how to invest YOUR money alongside theirs -- before the general public finds out and all hell breaks loose! ------------------------------------ In fact, the iShares Dow Jones U.S. Oil & Gas E&P Index ETF (IEO) is up a mere 2% since the start of the year. This ETF holds industry leading oil companies including Occidental Petroleum (OXY), Anadarko Petroleum (APC), Apache (APA), and more. What's even more interesting is these stocks have fallen behind while the price of oil is near multi-year highs. Take a look…  As you can see, there's a big disparity between oil prices and E&P stocks (blue circle) right now. In early April, oil stocks started heading south while the price of crude remained well over $100 per barrel. What's going on? Part of the reason why oil stocks have underperformed is that investors don't believe crude will remain at such high levels. After all, one of the main reasons crude shot to $110 a barrel in the first place is the standoff with Iran. Saber rattling over the country's nuclear program sent crude surging in February. But now that the standoff with the rogue country appears to be easing, reasons for oil to stay above $100 are running slim. In fact, US crude supply/demand fundamentals are starting to look slightly bearish. Recent Energy Information Administration (EIA) inventory reports reveal US crude supplies are growing at a staggering pace. If inventories are rising, prices should start coming down. Unless Iran returns to their hard line stance with their nuclear ambitions, oil prices could drop below $100 in the near future. So does that mean oil and gas stocks are about to dive even further? Not so fast… The stocks I mentioned earlier have already become drastically oversold and undervalued in recent weeks. In fact, APA is currently trading at a mere 6.7x forward earnings estimate. That's cheap. The S&P 500 index trades at a much higher 13.5x earnings. What's more, take a look at this week's relative performance for IEO and you'll find something interesting…  E&P companies are rallying in lockstep with the S&P 500. It looks like investors are finally realizing the value and upside potential in E&P stocks. Not only are OXY, APA, and APC heading higher, but a slew of industry leading companies are on the move. Will the rally last? Even if crude prices weaken a bit in coming months, I believe oil stocks are near their low point for the year. Barring some unforeseen market shock, E&P stocks will likely be much higher by the end of 2012. Now don't get me wrong, we'll likely see plenty of volatility in coming months. The markets are entering a weak time of year. So, further gains may not come easy. But rest assured, oil stocks hold some of the best upside potential the market has to offer right now. How can you capitalize on this opportunity? The easiest way is to buy the ETF I mentioned earlier… the iShares Dow Jones U.S. Oil & Gas E&P Index (IEO). IEO is highly liquid and trades just like a stock. But more importantly, it holds some of the world's leading oil companies. If you're looking for value in the markets, E&P stocks should be at the top of your list! ***Editor's Note*** Speaking of oil prices, subscribers to my Commodity ETF Alert just took solid profits on a trade we initiated when crude was $80 a barrel last summer. If you'd like to discover how to trade commodities via ETFs, click here. Until Next Time, Justin Bennett | Friday, April 27, 2012  • American Eagle Outfitters (AEO) popped to a new 52-week high of $18.30. Their market cap is now over $3.5 billion. • Equifax (EFX) surged to a new 52-week high of $47.24. They have a market cap of over $5.5 billion. • Accretive Health (AH) dropped to a new 52-week low of $10.50. Their market cap is now $1 billion.  "Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway." -Warren Buffett   
 Stock Options To The Rescue! Qualcomm (QCOM) Wednesday, April 25, 2012 Call A Doctor... Biotechs Have Buyout Fever! Monday, April 23, 2012 Chesapeake's Natural Gas Nightmare... And How To Profit From It Friday, April 20, 2012    |
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