Well, you are right on one side: if oil goes down and stays down, a lot of companies might not be good investments. And the biggest risk is if we fall into global recession: then oil can stay down long time.
On the other hand, I feel like your arguments are rehash from 2008. It was all the same then: if oil stays down, "There will be a lot of reserve write offs, some unexplored land will probably be worthless. Companies dealing in the Energy Capex sector will probably see 30% revenue reductions", the whole world is going to implode, and so on and so forth. Doom and gloom all the way. It can only get worse, sell, sell, sell.
The time to sell was when oil was at $100, not when it is at $45. But when oil was at $100, you and others were telling to buy: APA, CVX, etc. Wasn't it more risky to buy when the oil was 55 bucks more expensive? When stocks were 2x-5x higher than now? Isn't the whole point to buy low and sell high and not the other way round?
Can oil fall to $20? Sure it can. Should we wait to buy until it falls to $20? That's really your call. You might hit the nail on the bottom if you are really good. I'm not good. I don't have a clue if oil will fall to $20. But I have a plan and I'm sticking with it. In the worst case, everything is worthless and I will lose ~20% of my portfolio (my current exposure is 10%, I'll get to 20%+ by the time oil hits $20).
But, for example, GTE has 360M in cash. No debt. The company is selling for ~1B today (was lower yesterday). So 1/3 of market cap in cash, no debt. DRAGF - 2.4B in cash, 3.5B market cap. SPND - 33M market cap, 17M cash, no debt. So let's not go into "they are all worthless" routine. :)
Ultimately, it's your call though. There are pretty much two outcomes. World goes into global recession and you get to buy much better companies much cheaper while I have wasted (some of) my money on oil plays. Or economy does not collapse and then oil plays might be the only attractive investment. Cause seriously man, most of the rest of the market does not look attractive at all.
Good luck. :) |
