Following the recent market crash in the oil and energy sector, many investors have gone bargain hunting. But in this volatile market, which energy stock has the greatest risk to reward ratio? Without knowing when depressed energy prices will rise again, which names offer protection against bankruptcy and insolvency? My favorites in this type of market are the heavy hitters, the stalwarts of the market. Sure they may not have as much upside as some of the smaller names, but they offer me the much sought after safety blanket in today's rough market, while still capturing the upside in the eventual rise in energy prices.
The following is a brief overview of the top 5 energy companies based by market cap:
ExxonMobil (XOM): Heavily dwarfing its rivals with a near $330 billion market cap, ExxonMobil's ability to use pricing power is unmatched. It currently spots a P/E of 7.5 and a dividend yield of 2.3%. With a share price over 1/3 lower than its 52 week high, Exxon is a natural place to start your research.
Petroleo Brasileiro (PBR): It is the largest producer of gas and oil in Brazil. It also has strong ties internationally and could benefit from possible currency exchange rates. Its superiority is shown in its 15% profit margins and 21% operating margins, out pacing many rivals. With a market cap of $140 billion, PBR's reserves and future projects leave it well positioned for the future.
PetroChina (PTR): Based in Beijing China, PetroChina's stock followed the roller coaster that was the energy bubble. After Warren Buffett sold his entire stake, and following their status as the first trillion dollar company, PTR's stock price has come down to earth. With a strong grip on China's natural gas and petroleum production, and a reasonable market cap of $140 billion, PetroChina may have become a bargain.
Royal Dutch Shell (RDS.A): Located in the Netherlands, RDS has a strong brand name and a large, developed production arm. Recently on the Goldman Sachs conviction buy list, RDS may be a value with a P/E of around 6. It also sports a dividend yielding 6%. Royal Dutch Shell A shares have a market cap of just over $80 billion.
Chevron (CVX): Another beaten down behemoth, Chevron sports a P/E of 5.5 and a dividend yield of almost 4%. Their profit margins are a tad over 9% and there has been a recent spur of insider buying. It has the same market cap as rival BP, around $125 billion, yet is able to get away with having 1/3 less employees (67,000).
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