Investment in Oil Stocks

The largest oil company, ExxonMobil, has not joined the price increase in oil stocks this year despite the price of oil being nearly twice what it was January 1. At just over $70 a share this is a fair market price, if you don’t believe in future growth of the world economy. It is very easy to see only doom and gloom as the US unemployment rolls top ten percent and entire fortunes were lost in last year’s market meltdown. However, oil stocks, including the biggest, are likely to ride the pending increase in oil prices to higher profits.

Future growth in Asia, South America, economies emerging from generations of Communism is Eastern Europe, and, even, Africa will increase the demand for raw materials, including oil. Oil stocks will likely prosper and what seems like a fair market price for oil stocks like ExxonMobil now will likely seem ridiculously low in the near future.

In a large, reasonably transparent market such as the New York Stock Exchange there are many large companies watched by many investors and analysts. This situation guarantees a fair market value to the larger companies. In fact, it guarantees a fair market value to all stocks as a fair market value is what people will buy and sell for when all have access to the same information. The problem with small cap stocks is that the information about them is not adequately disseminated compared to large companies such as big oil stocks.

Right now people who took too many risks before the meltdown have learned their less. Unfortunately it is yesterday’s lesson. At the end of a prolonged bull market there is the tendency to think that it will go on forever. That was the mistake many made. Now, after a huge excess was rung out of the stock markets of the world we are at the start of another growth cycle.

Right now one needs to look for those stocks, market sectors, and regions of the world where the most growth will occur and channel investment in those directions. Oil was $150 a barrel not so long ago and, according to many experts, will eventually reach and pass that price and oil stocks will rise along with the price of oil.

One of the oil stocks like ExxonMobil is a prime example of “left behind” stocks during a market rally. This is a good time to look for stocks whose forward looking fair market value far exceeds today’s fair market price. Think about herd psychology and make sure that you are not part of it. Don’t miss future growth opportunities because you learned last year’s lesson too late. This is a new year and the lessons about future growth are new at the start of a new growth cycle. Oil stocks, coal, natural gas, nuclear energy, and green energy solutions all stand to gain due to future growth of world economies. Today’s fair market prices on many of the stocks in these areas are based upon anxiety about future growth. If you believe in the ability of the world’s economies to right themselves you probably should be looking for those laggards that will be tomorrow’s winners.

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