With Bullish Outlook on Oil Prices, COP May Offer Investors Some Value

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BloggingConocoPhillips (ticker: COP) is an integrated oil company with operations in crude oil, natural gas, liquefied natural gas as well as refining. The stock has pulled back nearly 10% off its recent high at 81, and is now trading at 74.02.

Conoco Phillips sports a discounted peer group P/E multiple of 8.9 on a trailing basis, along with a dividend yield of 3.6%. By comparison, ExxonMobil trades at over an 11 P/E multiple on a trailing basis and yields 2.4%.

Technically, there is major support around 71, an area that has repeatedly held over the last several weeks. Over the past three months, COP has been a relative underperformer vs. the S&P 500, falling nearly 6% while the overall market was flat.

We look for COP to close that relative performance gap over the coming months and outperform the market. COP is also a favorite of Warren Buffett, with Berkshire Hathaway holding a 29 million share position.

Given our bullish outlook on oil prices over the next three months, combined with the discounted valuation, attractive yield, and positive technicals, we look for COP to challenge the old highs of 81 by the end of October.

Tim Biggam


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