oil prices

ENCANA CORP $36.15 (Toronto symbol ECA; Shares outstanding: 750.3 million; Market cap: $27.1 billion; SI Rating: Average; Dividend yield: 2.2%) focuses on unconventional natural gas. Its shares have moved up lately, along with higher gas prices spurred on by cold weather. CENOVUS ENERGY $27 (Toronto symbol CVE; Shares outstanding: 751.3 million; Market cap: $20.3 billion; SI Rating: Extra Risk; Dividend yield: 3.1%) specializes in oil-sands projects, oil refineries and conventional natural gas. Oil sands will need much higher oil prices to attract a lot of investor interest. Cenovus shares have moved sideways since the split from EnCana. EnCana is the more conservative of the two, with an SI Rating of Average. We see both as buys.

Valero Energy Corp., $18.16, symbol VLO on New York (Shares outstanding: 564.4 million; Market cap: $10.3 billion), is the largest petroleum refiner in the U.S. The company owns 16 refineries in the U.S., Canada and Aruba. It also has a network of about 5,800 retail gas stations in the U.S. In all, Valero refines about 3 million barrels of oil a day. Fewer people are driving because of the weak economy and high unemployment. As a result, Valero is refining less oil. That’s pushing down the company’s revenue and profits. In response to the falling volumes, Valero recently announced that it will permanently close its money-losing refinery in Delaware. The shutdown will cost the company up to $1.8 billion, or $2.15 a share, in writedowns, severance payments and other charges. However, the move will save Valero $450 million a year. As well, the company expects to sell the refinery’s inventory for $600 million to $700 million....

Husky Energy Inc., $27.17, symbol HSE on Toronto (Shares outstanding: 849.9 million; Market cap: $23.1 billion), is an integrated oil and gas company. Hong Kong-based billionaire Li Ka-Shing owns 70.6% of Husky’s shares. Husky produces conventional oil and gas across western Canada, as well as heavy oil (a heavy, black viscous oil) at Lloydminster, Saskatchewan, and from the oil sands at Tucker, Alberta. Husky also has major holdings in eastern Canada, including interests in Newfoundland’s Terra Nova and White Rose offshore oil fields. Apart from its exploration and production activities, Husky owns a number of refineries, including a light-oil refinery at Prince George, B.C., and an asphalt refinery at Lloydminster, where it also has a heavy-oil upgrader. (Heavy-oil upgraders take heavy oil and process it into high-quality conventional crude oil.) Husky also has about 500 Husky and Mohawk gas stations in western Canada and Ontario....

APACHE CORP. $98 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 336.2 million; Market cap: $32.9 billion; Price-to-sales ratio: 4.1: WSSF Rating: Average) produces oil and natural gas from properties in the U.S., Canada, the U.K., Australia, Egypt and Argentina. The company gets roughly 50% of its production from oil, and 50% from natural gas. This balance has helped shield the company from falling gas prices, which are down over 50% from a year ago. Oil prices, by comparison, are down roughly 35%. Despite the lower prices, Apache increased its daily production to a record 607,118 barrels (including oil and natural gas) in the third quarter of 2009. That’s up 3.4% from the previous quarter, and 19% from a year earlier....

Resource prices have climbed sharply since early 2009, as the global recession began to ease and some countries’ economies returned to growth. Despite their recent gains, prices for oil, gold and other commodities will likely keep rising. That’s partly because resources act as a hedge against inflation. We feel the best way to profit from rising resource prices is with high-quality companies, such as these four. They are all leaders in their fields, and are doing a good job of keeping their costs down. However, only three are buys right now. ENCANA CORP. $55 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.2 million; Market cap: $41.3 billion; Price-to-sales ratio: 2.1: WSSF Rating: Average) will split itself into two separate companies in December, now that shareholders have approved the plan. Break-ups like this help unlock hidden value, and generally lead to above-average results for a period of years....

QUAKER CHEMICAL CORP. $21 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 11.1 million; Market cap: $233.1 million; Price-to-sales ratio: 0.5; WSSF Rating: Average) makes lubricants and chemicals that keep mechanical parts from corroding. Weaker demand from carmakers recently prompted Quaker to cut 10% of its workforce. These savings helped the company earn $0.45 a share in the third quarter of 2009. That’s up 9.8% from $0.41 a year earlier. The company needs oil to make its products, so it also gained from lower oil prices. However, sales fell 25.4%, to $118.9 million from $159.5 million. The company is using its improving earnings to pay down debt. Its long-term debt is $64.9 million (or 28% of its market cap), down from $84.2 million at the end of 2008. Quaker’s $0.23-a-share quarterly dividend seems safe, and yields 4.4% on a yearly basis. Quaker Chemical is a buy.

Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, but it’s unlikely they will soon surpass last year’s highs. Still, oil is a good hedge against inflation. We feel that the best way to cut your risk in the volatile resource sector is through well-established oil producers like these three. Their large reserves should last decades. Moreover, they focus on politically stable North America. SUNCOR ENERGY INC. $37 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $59.2 billion; Price-to-sales ratio: 1.7; SI Rating: Average) is Canada’s largest oil producer following its purchase of Petro-Canada on August 1, 2009. Petro-Canada shareholders received 1.28 Suncor common shares for each Petro-Canada share they held....

MOTOROLA INC., $8.57, New York symbol MOT, rose 5% this week after it reported better-than-expected earnings. The company also launched two new smartphones. In the three months ended October 3, 2009, Motorola earned $12 million, or $0.01 a share. If you exclude unusual items, it would have earned $0.02 a share. Analysts had expected the company to break even. In the year-earlier quarter, Motorola lost $397 million, or $0.18 a share. Among the unusual items the company recognized in the quarter were costs related to its plan to break itself into two publicly traded companies — the mobile-devices business, and the wireless-infrastructure and home-equipment operations. Motorola lowered its costs during the quarter, including an 8% cut in its workforce and the closure of some plants; these were the main reasons for the improved earnings. Motorola feels that these reductions will save it $1.9 billion in 2009. That’s up $100 million from its previous estimate....

At Successful Investor Wealth Management, we sometimes get questions from investors who are looking for one great stock pick, or one big idea, that can quickly make them rich.

Beginning investors often start their portfolio investing with these types of ideas....

FEDEX CORP. $74 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 312.5 million; Market cap: $23.1 billion; Price-to-sales ratio: 0.7; WSSF Rating: Average) delivers packages and documents in the U.S. and over 220 other countries. FedEx earned $0.58 a share in its first quarter, which ended August 31, 2009. That’s down 52.8% from $1.23 a year earlier. Revenue fell 19.7%, to $8 billion from $10 billion. Like most shipping companies, FedEx added a surcharge to its fees when fuel costs were rising. But now that oil prices have fallen to around $77 a barrel from last year’s peak of $148, FedEx is getting less revenue from these surcharges. Despite the drop in fuel-surcharge revenue, lower fuel costs should help FedEx increase its profits as an economic recovery pushes up shipping volumes. As well, European-based courier DHL Express exited the U.S. domestic delivery market last year due to growing losses. This gives FedEx an opportunity to expand its market share....