Good stocks to take advantage of low oil prices?

[panera]

Newbie here. I have about $5000 to invest for the first time, and I thought it would be good to invest in stocks that will benefit from the lower oil prices. I was thinking of airlines (a search about this topic lead me here) and wanted to get other people's opinions about it. Would this be a good stock category to invest in? Others I should consider?

[bjl584]

Airlines are a good start.

Also, I'd look at the tanker ship industry.

And some of the oil companies are quite oversold as well.

[panera]

And some of the oil companies are quite oversold as well.

What do you mean by oil companies being oversold?

[bjl584]

What do you mean by oil companies being oversold?

A lot of the oil companies have been sold off as oil has dropped. But, much of it has been irrational panic selling.

Look at the fundamentals of BP or Exxon and you'll see that the shares are trading at quite a discount at the moment. As a mid to longer term investment, I think it's a good time to buy shares. I recently added to my position in BP.

[ScottRUnderwood]

If you want to invest in Airlines or ship industry then it is a good option but you can consider another investment also which can provide you lower risk and higher returns.

[Wisedog]

Newbie here. I have about $5000 to invest for the first time, and I thought it would be good to invest in stocks that will benefit from the lower oil prices. I was thinking of airlines (a search about this topic lead me here) and wanted to get other people's opinions about it. Would this be a good stock category to invest in? Others I should consider?

This is a bad idea. I assume you aren't an expert in any of these fields. And those who are experts have bought or sold these stocks based on oil prices and other factors. So the price today is as accurate as one can assume based on the speculated price of oil. The market is efficient - never think you are the only one who found the loophole

[Wisedog]

If you want to invest in Airlines or ship industry then it is a good option but you can consider another investment also which can provide you lower risk and higher returns.

Correct. Such as a low cost index fund.

[GrimJack]

I agree that an index fund is the way to go but to answer your specific question - buy oil stocks. Right now everyone is dumping oil; oil is cyclic with boom and bust coming as regularly as clockwork; most of the oil flooding the market is not profitable at the current price so many of the small players who were on the margin at $100/brl will bust. Of course this is not a sure thing because the Fracking players can shut down their operation with very little problem starting back up when the price climbs. Most of non-frack wells can not shut down because their wells will lose up to 50% of output when shut down and restarted (I do not understand the technicals of this but this is what some oil watchers are talking about).

[snafu]

panera, Welcome to SA. I suggest caution since you are new to investing. Do you have a retirement investment program? 401K? ROTH? What are you holding? What are fees and expenses? Do you have a brokerage account? What are the transaction fees and expenses?

1st, I suggest you examine your own risk tolerance by looking at an on-line questionnaire like www.bankrate.com. How would you feel if your first foray in investment lost $ 1,500 and dropped to $ 3,500? Would you sell and take the hit? Would you buy more units to try to lower the unit price and see it as the investment equivalent of a 'sale?' Would you hold and hope the volatility would carry the chosen stock back up sometime in the future? It wouldn't matter after 5 years?

2nd, are you an 'investor' or a 'gambler?' An investor understands that the choices they have researched need to be left to grow for about 5 years unless new facts and new circumstances make change prudent. Gamblers stay connected, watch their stock hour-by-hour and leap out if their stock drops by a pre-set percentage plus cost. you can order an automatic sell if the unit price drops to $ 'X.'

I agree, for investors there is a happy confluence of events, oil prices are dropping due to war in the middle east, ISIS, fracking and end of year tax sell off. Prices will rebound but the unknown factors are how much further will they drop and how long will they stay down? What airline futures oil prices will be negotiated and whose plane might disappear from the sky like Malaysian Airlines MH370 ?

It's important to have your money work for you and savings accounts are not keeping up with inflation at the grocery store. To protect yourself, I hope you'll do a touch more research.

[tripods68]

Newbie here. I have about $5000 to invest for the first time, and I thought it would be good to invest in stocks that will benefit from the lower oil prices. I was thinking of airlines (a search about this topic lead me here) and wanted to get other people's opinions about it. Would this be a good stock category to invest in? Others I should consider?

I sold off shares from S&P & Technology in order to buy in 'dip' in Oil & Gas category--Some of the stocks I've followed have experienced losses somewhere between 40% to 60% of its highest price in 52weeks. Even with its implied volatility, i'm pretty confident the stock will gain some huge profits in the end. Having said that-- this asset class represent less than 5% of my overall portfolio.

[corn18]

BP is currently discounted (more so than XOM) and it spins off a nice 6.4% dividend. I like it. Going to add it to my wife's IRA.

[corn18]

Investing is all about placing your best researched intuitions where you feel comfortable about what will take place regardless of the expectations of others or the status of the nation's economy.

@DavidFreeman: are you just trying to get to 10 posts so you can post a link or something? Just wondering.

[Berryskud]

More

Investing like this is no more than gambling. I suggest that you use the $5000 to either educate yourself or invest in a managed fund

[Spiffster]

Investing like this is no more than gambling. I suggest that you use the $5000 to either educate yourself or invest in a managed fund

I would suggest an index fund. Lower fees and usually better performance.

[kv968]

BP is currently discounted (more so than XOM) and it spins off a nice 6.4% dividend. I like it. Going to add it to my wife's IRA.

Discounted more than XOM in P/E and P/B but fails in nearly all other metrics.

BP has a very high D/E ratio and due to that their Enterprise value/EBITDA is nearly double that of XOM or CVX.

Their free cash flow isn't covering the dividend (and barely has over the past couple of years) so that may be in jeopardy of being cut in the future as well if oil prices don't rebound.

Not saying BP is a bad stock (I've looked into myself), but don't just go off of P/E and P/B with oil stocks (or any stock for that matter) especially when really looking at the dividend.