Let’s head back momentarily to a time precisely five years ago. Crude prices were headed for their all-time highs near $150 a barrel, and Warren Buffett was ambidextrously reaching for all the ConocoPhillips (NYSE:COP) shares he could get his hands on.
It was, he later admitted, a major mistake. But who knew? The seers at Goldman Sachs were convinced that black gold was ineluctably headed for $200 a barrel. As a consequence, shares in the then-integrated ConocoPhillips (NYSE:COP) — which has since reinvented itself as the world’s largest independent producer — like those of most other oil and gas operators, seemed like a grand bargain. That is, until crude prices turned tail and plummeted to the $30s during the next six months.
The market’s speed bumps
Today, we have crude oil in earshot of $100 a barrel and, as I see it, at least three key phenomena capable of affecting substantially both oil levies and the markets, in general. First, there’s the obvious anxiety about the Federal Reserve’s timing for weaning us, and our economy, from our addiction to monetary stimuli. Next, the conflagration in Syria is likely far more potentially world-altering than is generally recognized. And third, the implementation of Obamacare will probably wound key aspects of our economy.
Almost certainly Obamacare will have a deleterious effect on the nation’s unemployment rate, as companies furlough some employees, and switch others to part-time status. But then, even the Fed apparently is unaware of the program’s dicey specter, since its prediction for unemployment in 2014 has just been lowered to a 6.5% to 6.8% range, from the earlier 6.7% to 7%. Lots of luck.
All of these considerations are coalescing to signal loudly that we’re dealing with an equities market that’s best treated with kid gloves. One way of doing so, it seems to me, is to hold at least a modicum of solid energy names. While there are lots of compelling companies in the sector, let me point to a few that I believe can provide a combination of stability and upside potential.
Schlumberger Limited. (NYSE:SLB) is easily the most brightly shining example of a company whose attraction is based, at least in part, on a hard-to-beat combination of geographic scope and technological leadership. With a “crew” of about 120,000 plying their trade in about 85 countries, the company serves the entirety of the worldwide petroleum industry, including national oil companies, integrated majors, and independent producers.
Technology, where Schlumberger Limited. (NYSE:SLB) is the industry’s clear-cut leader, has become progressively more vital to the global quest for oil and gas. The company fully operates 25 worldwide research and development facilities, into which it pours nearly $1.2 billion annually.