Art Smith, the head of John S. Herold, an energy research firm, was interviewed in Barron's this weekend, and it turns out he agrees with me on everything. [Okay, okay, so I agree with him on everything, calm down.] If you're into investing in the energy sector, I recommend buying a copy and reading the entire interview, but the highlights have been summarized in a post on Seeking Alpha.
Seeking Alpha Energy Stocks: Barron's: Oil Guru Art Smith's Picks for 2007.
My own summary:
- Big oil is struggling with exploration for various reasons, they will eventually have to step up to the plate to increase their reserves, most likely by takeovers of mid-size companies.
- Buy companies with large North American natural gas reserves. They are cheap and the natural gas situation in North America appears headed for a squeeze.
- Buy Canadian oil sands companies for their long term assets and relative lack of political risk.
In terms of specific stock recommendations, the Seeking Alpha post highlights Mr. Smith's stock picks. My favorites of that list are NXY, CNQ, APC, CHK, SU. Mr. Smith also highlights NXY and SU as likely to be taken over. NXY I think is a goner, highly likely to be acquired at some point, but I am skeptical of the idea that SU will be bought, due mostly to the fact that the price would be too high for any acquirer except somebody who desperately needs oil sands assets. (Think BP.) I think APC is also a good takeover candidate, once it finishes tidying up after it's recent purchases of Kerr-Mcgee and Western Gas Resources.