Analysis requested by Anna Valéria Andrade
The major players in this sectors in Australia are STO (Santos) and WPL (Woodside Petroleum).
We have done an analysis of OSH back in August on BGS 20 Group (use the search tool to find), and we had informed that we rather have Santos on our portfolio than OSH, so we still do, although we currently don’t hold any STO stock as we have just done a 20% exit, Oil Search is also highly susceptible to oil and gas prices market.
Due negative oil prices back in March the stock price has fall all way from $7.5 to $1.7 with the peak of its recover in early Jun.
Since the Pfizer’s Covid-19 vaccine press release early this week, there was a big moment on money into the Enegy Sector, with hopes that travel demand could rapidly increase, there is also the fact of winter coming into the Northern Hemisphere, helping increase the demand for gas.
The key elements we have to consider is that oil prices is still ranging at the same $40 levels for quite some months, it was some excitements for sure, and although some analysts and experts say the oil price should be at $50 sometime soon, we don’t know until it actually happens. There is definitely a positive perspective these stocks, however we still needs the Covid-19 vaccine to be confirmed and effective, maybe not at 90% undisclosed effectiveness.
Key elements we are using for this analysis:
The trend has turned bullish this week with a very strong pull to the upside and now trading at 28% above the SMA, whereas STO trading 16% above the SMA and WPL 14% above the SMA.
SP trading well above EM confirming it is rising hard.
EMA also trading well above SMA
Heiken Ashi is very strong in all these three stocks.
Volume has been very highly over the last three trading days and is slowly decreasing day by day as the stock goes up, it needs to be watched, the more decreases on the upside the harder could be the correction, still more room to move upside.
Would be a great long term pick up by entering into a trade right now? We would say yes, but not with BGS 20 Strategy right now, as it already run 28% since the intersection, that could means the stock price could enter into a correction and we may experience some down fall for the short term as market starts to stabilise from the over action of the Vaccine news. Again, we believe it is a great sector to be in and we there is still a great upside, we only need to make sure this Vaccine will work and the world is back to normal, If that so, no doubt that all oil stocks will outperform as the markets moving forwards.
Comparing these three of the companies.
WPL | Mkt cap of $19.5B
STO | Mkt cap of $11.5B
OSH | Mkt cap of $6.5B
Some of the differences:If you are looking for stability the share price range of WPL is much narrower than the OSH and STO, therefore making a better pick over OSH. However, if looking for price fluctuation which is most of the goal in our trading strategy, then OSH and STO would be best pick, with WPL coming as the least volatile of them.
However, because WPL has been under a lots of pressure recent months compared with its pears, hence we believe that WPL has underperformed its pears and could be also a great choice with less exposure to the downside.
What would make an investor be choosing OSH over STO or WPL? Normally WPL has been consistenly paying the best dividend yeld among the three, ~6.5% compared to a much lower 3% dividend yeld in STO. Dividend wise, would put OSH right after WPL with 4% dividend yeld. These figures has obviously been affected by COVID-19, but it is sensible to have a clear picture about what these three companies have been doing in order to bring value to shareholders.
We hope it helps and please leave your comments and thoughts about these companies.
*Disclaimer: Note that although we have been investing in the Australian Stock Exchange and other markets for over 10 years, anything you read within this group is NOT financial advice; it is general information only and we strongly recommend to consult a financial adviser before making any investment decision that could have a significative impact on your wealth*