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Is it time to be greedy with oil stocks?

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Over the past few months I’ve been holding cash to wait and attempt to pick the bottom of the latest oil price decline. After all Buffet once famously said ‘Be fearful when others are greedy and greedy when others are fearful’, I’m now wondering with oil stocks at lows and WTI and Brent trading at US$44 and US$49 respectively: Is now the time to be greedy?

Oil stocks right now are as unloved as they have been for a long while, I can even count a few that are trading at a DISCOUNT to cash in the bank! Chartists are calling bottoms on many of these stocks but few are bouncing and most seem to freefall through previous support levels to make new lows, so you can see the hesitation many have with piling cash back into the sector.

Currently in the website portfolio we are down a touch on most stocks having made healthy profits on Dragon Oil (LSE:DGO) and shorting LGO Energy (LSE:LGO) but I think now is the time to be slowly accumulating shares in undervalued and unloved companies and wait for better days. M&A is certainly an option for the companies listed below and like Dragon could be taken out for far more than their currently trading at.

Of those that are undervalued currently that will see much higher share prices in the next few years are the two favourites Genel Energy (LSE:GENL) and Amerisur Resources (LSE:AMER) but there are a few others that will multi-bag on good news such as Trinity E&P (LSE:TRIN), Bowleven (LSE:BLVN) and Serica (LSE:SQZ). All of these companies are extremely cheap on key valuation metrics and now is the time to be buying on dips and accumulating large positions.

These ‘contrarian buys’ should make a good return in the long term even at a US$45-55 oil price and if we see a rise in the price of oil in the meantime then they will create fantastic returns.


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