When adverse market conditions set in, foreign stocks will generally suffer more than U.S. stocks.
Stocks based in the United States are better known and easier to be covered by the analyst and institutional investor community. That results in greater numbers of loyal shareholders, which is critical for a healthy stock price.
For savvy, long-term investors this can result in gains, as there are many excellent foreign publicly traded companies. CNOOC Ltd (NYSE: CEO), based in Hong Kong, and Total SA (NYSE: TOT), headquartered in Paris, are two major oil and natural gas entities that have plunged in the current market selloff for energy securities.
This is to the advantage of those looking to buy oil and natural gas stocks at a much lower price than six months ago, as CNOOC and Total compare very favorably with those from the United States, such as Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM).
Coupled with the greater price decline over the past six months, the future appears to be more promising for CNOOC and Total in terms of upside for the share price when the sector rebounds. Long-term investors should especially take note of the future earnings growth that is projected for each.
The chart below shows how superior many of the performance standards are for CNOOC and Total, as opposed to Chevron and ExxonMobil. A short float above 5% is considered to be troubling for a security.
|Price Decline Last Six Months||Earnings per Share Growth Projected for Next 5 Years||Profit Margin||Dividend Yield||Dividend Payout Ratio||Debt-to-Equity Ratio||Institutional Ownership||Short Float|
For income investors, CNOOC and Total offer far superior yields. The dividend payout ratio for each indicates that the dividend structure is sound.
That is a tribute to the management in two important regards for dividend investors. The first is that management respects shareholders enough to pay a very healthy dividend. The second is that the executive team is also prudent is its cash flow management, adroitly balancing a high dividend yield with modest payout ratios and levels of debt so that the company can continue to prosper.
The short float positions are also instructive. Even with the plunge in the price of oil since mid-2014, few have taken up short positions against Chevron, CNOOC, ExxonMobil and Total. The stock price for Total has fallen the most, but its short position is also the tiniest.
In totality, CNOOC and Total appear to have more potential to pay off than Chevron or ExxonMobil. The share price for each has fallen more. But the earnings-per-share growth projected by the analyst community is the highest for CNOOC.
The expected earnings-per-share growth for Total is much better than that for ExxonMobil. The dividend yields for CNOOC and Total are far superior, too. Combined, that should add up to more rewarding total return for long-term investors in CNOOC and Total.
Jonathan Yates does not have a position in any of the securities mentioned in this article.
Cheap Oil Here to Stay – For Now
Crude hasn’t been this cheap since March 11, 2009. And it’s likely to stay low for a while. OPEC refuses to cut production. And US production is expected to increase – not decrease – an additional 600,000 more barrels a day. The Saudis have played this one wrong – and you could profit from their blunder.
Top analyst Tyler Laundon’s found what he considers the best way to play this new, cheap oil boom.