There's an old -- and very appropriate -- investing saw that says, "Tips are for waiters." So I'm not going to bother giving you a stock tip. I do, however, have a stock idea for you.
What's the difference? Well, a stock tip is generally a hush-hush, wink-wink affair where the tipper expects the tip-ee to run out and buy the stock based on the tip alone. A stock idea, on the other hand, is a good starting point, but is in need of further research before it becomes a fully baked investment thesis.
So let's cut the jibber-jabber and get right to today's idea: Petroleo Brasileiro
Last year, when oil prices were peaking, it seemed like blue skies forever for Petrobras. Not only was the company serving up the hot commodity of the day, but investors were ga-ga over the growth ahead for its home country of Brazil. After being chopped down to a fraction of what they were, oil prices have shown some life recently. Petrobras' stock has responded in kind and has more than doubled since the lows it hit back in November.
Let's take a look at how Petrobras compares to some other companies in the energy patch:
|
Company |
TTM Net Profit Margin |
TTM Return on Equity |
Price-to-Earnings Ratio |
CAPS Rating
|
|---|---|---|---|---|
|
Petrobras |
15.0% |
23.8% |
11.7 |
***** |
|
BP |
5.2% |
17.6% |
9.8 |
***** |
|
Total |
6.3% |
18.9% |
10.1 |
***** |
|
Chevron |
9.1% |
24.7% |
6.8 |
**** |
|
ExxonMobil |
9.5% |
33.8% |
9.6 |
**** |
|
PetroChina |
10.5% |
13.3% |
14.3 |
**** |
Source: CAPS, Yahoo! Finance, and Capital IQ, a division of Standard & Poor's. TTM = trailing 12 months.
As you can see from the chart above, CAPS members seem to like a bunch of the major oil and gas names. However, if we were going to make a boy band consisting of these companies, Petrobras' operating statistics and popularity among CAPS investors would give it a pretty good shot at being the lead singer.
I have given Petrobras' stock a thumbs-up in my own CAPS portfolio, but I'm far from alone. CAPS All-Star imajerbear gave the stock a thumbs-up in February and chimed in with this pitch:
Oil and gas may be deep in to it right now, but long term as the world economy pulls itself up by it's bootstrapes, oil will make a comeback. Alt energy is wonderful, but it will take many years for it to make a significant dent in the use of oil. The days of easy extraction of oil are gone and some of the petroleum resources ie oil shale will require prices above $80 long term to exploit them economically. Oil fields around the world are showing decreases, some major, in their output. I am also convinced that OPEC is actually seriious this time about toeing the line on production reductions to try to drive the price of oil to the $70 mark or better.
So what do you think? Is this an idea worth pursuing or is Petrobras an overrated stock? Head over to CAPS and let the 135,000-member community know what you think.
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