With the recent decline in the price of oil, many investors are wondering, where the opportunity is to make money from the decline? As I have stated before, my investing motto is always to keep it simple; which in this case would mean "simply buy oil stocks."
Over the past few months, the price of oil has unexpectedly fallen from over $100 a barrel to the $50 range. Neither economist, market analysts, or oil industry experts saw this decline coming. So I believe it is safe to say that no one, certainly including myself, knows were the price of oil is going in the near future. But with that being said, I think most would agree the use of oil is not going away in the near future. Oil is and will be the most widely used form of energy in the coming years, despite the rise of natural gas, solar or any other form of energy which currently exists.
The fall in the price of oil has caused oil stocks to decline. For example, Exxon Mobile (XOM) is down more than 8% over the past six months while Chevron (CVX) is off by nearly 14%. Smaller players like Anadarko Petroleum (APC) is off by nearly 22% and Pioneer Natural Resources (PXD) is off by 32% as the price of oil has fallen during the second half of the year. These types of declines have been felt throughout the industry.
One of the first and most common antidotes we are taught as investors is "buy low, sell high." When stocks fall, their price is low or at least lower than it was, which means if you believe in the company, or in this case the industry, then now is the time to buy. Continue reading "Falling Oil Prices Presents Opportunity"