Update: This is the edited version of Matt Towery’s Investor Notebook, an unedited version ran earlier
(Editor’s Note: This is the second in what will be an ongoing look at how public opinion and news analysis can impact investment strategies).
An Update on Oil
First, here’s a quick update on my Dec. 11 article suggesting that the plunge in oil prices might be both a great short term and long term move for investors. Monday’s sharp drop in oil prices, which spilled over into the entire market, would have us believe that there is no bottom in sight for oil or related stocks. But that’s not true. It’s why I looked at dollar averaging into strong oil related companies.
I based that on both the geopolitical agenda that likely plays a role in this relatively sudden drop in prices and the fact that future contracts relating to U.S.-based shale have been reportedly declining. We still don’t know the long term impact of investing in a solid and diversified petrochemical company such as my example of Conoco Phillips (although at these prices one would guess it potentially lucrative). When my article ran on Dec. 11 Conoco (COP) closed at $63.61. Had one purchased one thousand shares of the stock at that price and simply sold the stock near its closing price on December 31, 2014, they would have picked up a short term gain of over $5400. Of course that short term gain is taxed at ordinary income levels but it probably would pay for plenty of Eddie Murphy’s often quoted “GI Joe’s with the Kung-Fu grip” from the movie “Trading Places.” But consider if one purchased 10,000 shares under that same scenario. That would be closer to $54,000, well worth less than a month’s worth of “ordinary” work.
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