Oil prices continues to hover just above the $50/bbl mark, as the stock market continues to wait for the next move down. As I watched the sell off the past few days, I noticed that the stocks hardest hit were the one's making investors the most money. It has become obvious that we are in a a hedge fund controlled market. Hedge funds are basically unregulated trading partnerships, and they only get paid on profits. Since HF's only get paid on profits, they have been locking in their gains in the energy and basic material sectors.
After a brief fall in oil stocks, I would expect the Hedge Funds to buy back their positions and get ready for the next leg up.
Our favorite oil stocks are Conoco-Phillips (COP), Valero (VLO), Exxon-Mobil (XOM), and Chevron-Texaco (CVX). All four stocks bounced off their lows for the day. The best way to buy these stocks is to dollar cost average in. I want to see how these stocks are going to react to a break below $50/bbl before I add to my postions.
On the income side, Wall Street has successfully scared investors away from anything remotely related to General Motors. GM will go through some tough times for a while, and in all probability cut or eliminate the common stock dividend. GM's GMAC division is an entirely different story. GMAC does much more than finance automobiles. In fact, GMAC sells mortgages, insurance, car loans, education loans, banking, as well as a host of other financial services. For this reason, I find the GMAC preferreds very attractive. Each preferred has a $25 par value and are currently trading under $20/ share. They current yields on many of these preferreds are 9% or better.
If your interested, take a look at the following GMAC's
GMAC
GJM 7.35 8/8/32 19.11 8/8/2007
GKM 7.25 2/7/33 18.99 2/7/2008
