Oil stocks has taken an unprecedented hit during the pandemic, with companies such as Exon Mobile(XOM) and Chevron(CVX) touching 15 year lows. This large drop was primarily caused by the unreal/insane collapse of oil demand as the world came to a standstill amid numerous lockdowns in an effort to curb the spread of Covid-19. While the lockdowns did have some positive impact, the ripple effect on the Global Economy was extreme and oil futures were even in the negative.
Oil Should make a Comeback
Let’s be honest, clean energy is great but the negative externalities created by battery production is underestimated. Furthermore, the cost of switching to clean energy is still pricey. When the global economies begin to reopen, the demand for oil should recover. While the demand may never reclaim pre pandemic levels, I believe that oil is here to stay for the next 5-10 years.
Oil prices are a simply a result of supply and demand. With oil demand coming to meet supply, prices should increase and the bottom line for large producers should also recover. I believe we could see oil stocks reclaim their pre pandemic levels in the next year or two once a vaccine is completely rolled out.
Top Oil Stocks for the Future
- Chevron (CVX)
Chevron is one of the largest and most well known oil producers in the world. The company has suffered a hit in 2020 with oil prices per barrel near decade lows. On the other hand, after a rough few months, the companies strong balance sheet coupled with a nice dividend has me bullish on Chevron. I believe Chevron Stock could retouch its all time highs of $122 within the next several years. With a current price of $89.44 that is a nice 26-27% increase from current prices along with a 5% plus dividend yield, I would like to add some CVX.
2. Exon Mobile (XOM)
In contrast to Chevron, Exon Mobile has some ways to go before regaining traction. The company has high capital and a weaker balance sheet. Where XOM beats Chevron is through their dividend of 8% plus. With its current share price in the low $40, I see significant upside of the company and could see stock prices above $60 in the next few years. I wouldn’t be surprised if XOM is $70 plus in 2022.
While there could be a number of other options, Exon Mobile and Chevron are currently my two favorites in this sector, while also maintaining a huge market share. Unlike many of the smaller companies such as Occidental Petroleum, Marathon Oil, and Haliburton, I see less risk in the mentioned companies and sustainable dividend yields for the next few years.
What invest in Oil?
Oil is an integral part of the global economy and while electric vehicles get all the love, oil will continue to play a vital role in the transportation, aviation, and shipping industries. I think allocating a small portion of your overall portfolio to value or dividend investing is extremely important to reduce your overall risk. Don’t get me wrong, I am a huge huge fan of growth stocks with a large stake in Fastly(FSLY), Nio Inc(NIO), and Open Door(OPEN). I love owning tech stock but without diversifying, I put my portfolio in a highly volatile area.
How to begin investing
To Begin Investing you can use Robinhood, an easy to use brokerage with a very clean user interface. To get started with Robinhood click here.
Disclaimer: I am not a financial expert and these opinions and views are solely my own. I own Chevron, Exon Mobile, and BP,
