A number of sectors are looking strong going into the back half of the year. In one sector, costs are going down, expenditures look likely to drop, and prices remain robust, which makes for an attractive move going forward.
The sector? Oil and natural gas. A number of companies are looking good as OPEC is set to meet on production, with oil potentially capable of seeing oil hit $100 per barrel.
Case in point is ConocoPhillips (COP). The energy giant just increased its share buyback by $1 billion, from $1.5 to $2.5 billion. That’s on top of the strong dividend that shares pay now of 2.8 percent. And that’s as the company continues to scale back on its capital expenditures.
Shares of the energy giant are up 45 percent in the past year, and the company is coming back to profitability after last year’s volatile oil prices. Shares appear to be going for about 17 times earnings.
Action to take: While not the highest yielding play in the space, the company has ample financial flexibility to deal with a volatile oil market, and the company has a history of growing its dividend. That makes shares a worthwhile buy.
Shares also work for a trade for anyone expecting oil prices to rise higher, given the current uptrend in place. The January $70 calls have half a year to play out, and should move in-the-money if the current trend continues. Last trading at $2.62, traders can likely nab triple-digit gains, and should look to take quick profits on a spike in oil prices.
Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.