A few hours after my previous post, Hedgeye's trading signal on oil changed to bullish trend. I've been waiting for months for this, so I bought a whole lot of oil stocks. From 5% to 15%. Risky, because its overbought and the signal can always flip back, but now is as good a time as any.
I still think we are in a decade of inflation. I expect oil to maintain its price for one or two years, then explode in 2025 or 2026. Like Uranium now. Meanwhile, I'm paid to wait as oil companies gush cash (at 2023 oil prices) with generous dividends or buybacks. For context, after peaking in 2022, the oil price hovered between $70-90 last year:
CNQ is a Canadian oil sands producer with long-life reserves, profitable, with generous dividends and share buybacks:
In 1Q24 they target to reduce net debt to 10 billion, after which they'll return 100% of free cashflow to shareholders. I estimate either doubling dividends, or more than doubling share-buybacks. Annualising their 9M23 profits, they are trading at a PE of 13.
Acker BP is a Norwegian O&G producer, that is still paying down debt but still also pays dividends:
Its trading at 12X 2023 earnings.
Var Energy is a smaller Norwegian producer, from Modern Investing Substack. Although they pay dividends, they are a growth story, aiming to increase production by 50% by 2025. Its trading 8 times 2023 earnings. This company has more operational risk.
The risks are politics and ESG. Norway's district court overturned approval for several oil projects. While Canada will introduce a carbon tax.
Also sold my gold I'm as no longer expecting a recession. And I need cash to buy stocks.
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