Why Merrill Lynch Prefers These 4 Top Oil Stocks Now

Energy

Published: March 21, 2016 11:05 am

Last Updated: January 13, 2020 11:42 am

Any way you look at it, the oil trade has been a tough one. Needless to say, a huge price decrease in the commodity that drives the industry will always separate the good companies from those that are over-leveraged. Plus, rather than trying to grab the proverbial falling knife, it’s often better to see if a rally is the real deal. With oil going through the $40 mark, it broke a downtrend line that came from highs printed almost two years ago.

The question is which stocks to buy now. Despite the rally, there is always the chance that oil rolls back over. The smart move is to stay with the leaders that pay good dividends. We screened the Merrill Lynch energy universe and found four rated Buy that still look very attractive.

Exxon Mobil

This is one of Merrill Lynch’s top picks for 2016. Exxon Mobil Corp. (NYSE: XOM) is a solid large cap energy sector play that the Merrill Lynch analysts are very positive on long-term as the overall corporate strength of the massive integrated giant plays a significant part in the company’s usually solid earnings reporting pattern and in maintaining dividend coverage.

The global downstream chemical segment plays a huge part for Exxon, one that many others on Wall Street don’t fully appreciate as the segment contributes an estimated 16% of overall total revenue. Very solid reasons for adding the stock to a long-term growth portfolio are that the company has consistently demonstrated disciplined investing, operational excellence and technological innovation.

Exxon recently appointed the head of its refining business as its new president, which makes him the probable successor to Chief Executive Officer Rex Tillerson, a move designed to avoid raising eyebrows on Wall Street. The new president, Darren Woods, is a 23-year company veteran and should keep the company on the steady path for growth and progress.

Exxon investors receive a sizable 3.47% dividend. The Merrill Lynch target for the stock is $95. The Thomson/First Call consensus price objective is $80.52. Shares closed on Friday at $84.20.