An Insider Bought Occidental Petroleum, Should You?

We’ve mentioned Exxon Mobil and BP, and would also include Chevron Corporation (NYSE:CVX) and ConocoPhillips (NYSE:COP) as additional choices in oil and gas. It turns out that on a trailing basis Occidental is the most expensive of these five oil majors, if only narrowly: the other four stocks have trailing P/Es in the 7-9 range. However, these peers are generally expected to see their businesses worsen next year and so Occidental finds itself more or less in the middle of a similarly narrow range when pricing these stocks on a forward earnings basis. In a way, this makes sense as this is a commodity business and it’s not that likely that any of these businesses will be increasing their production much more than any other. However, we can’t help but think that the industry as a whole looks cheap. BP offers the highest dividend yield of the bunch, at over 5%, and tends to be cheap in terms of multiples as well; of course, this company is suffering from poor sentiment after the Deepwater Horizon disaster. Exxon Mobil and BP also joined Occidental on our list of the most popular energy stocks.

We’re not sure if Poladian likes something in particular about Occidental, or if buying the stock is just a way to go long the oil and gas industry. We’re skeptical that the company is the best buy- BP is cheaper and actually increased its earnings last quarter versus a year earlier, while Exxon Mobil is about the same price as Occidental and is the market leader. Those two companies in particular look like more interesting opportunities for future research.