Oil & Gas Stocks - Diversification

Discussion in 'Stocks' started by Jerry Collins, Jan 23, 2012.

  1. I wanted to get the opinion of experienced traders in the Oil & Gas sector and ask how you manage to balance your investment portfolios with lower risk stocks in other areas.

    Having stayed far away from the high risk nature of oil and gas stocks for many years, mainly because applying the same P/E, net debt and return on investment ratios always used to throw up odd results, I am now starting to consider them as a small proportion of my portfolio.

    My question is what percentage of your portfolio do you hold in O&G stock? And what indicators are you looking for, beyond whether or not they have just struck oil, in their company reports? Or is it more about the intangibles such as the quality of their management team?

    Thanks for your help.
  2. I'm no expert, but I do focus on E&P companies. For me, I'd say the factors are size, where they are drilling, oilly or gassy, debt structure, likelihood of a financing that will cause issues, eg a convert or big equity issue and management. The last keeps me out of some otherwise attractive companies, eg CHK.