Energy

If OPEC Blinks and Cuts Production, Buy These Top Oil Stocks at Once

Lee Jackson

Published: January 27, 2016 8:20 am

Last Updated: January 13, 2020 2:32 pm

It finally hit the tape Tuesday. There was some chatter that the OPEC oil cartel finally has started to let it be known that it would reduce production if other nations did. And think about it: other than oil, what do most of these Middle East countries have that produce revenue? Exactly, nothing. With prices plunging, their countries respective big budget deficits are skyrocketing.

So who will benefit the most? The same companies that are fighting their way through the downturn: the large and mid-cap leaders who have been there before. We screened the Merrill Lynch research universe for the oil stocks that look well prepared for 2016 and could benefit big if prices start to trend higher.

Exxon Mobil

This is one of Merrill Lynch’s top 10 picks for 2016. Exxon Mobil Corp. (NYSE: XOM) is another 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.

The company’s global downstream chemical segment plays a huge part for Exxon. It may be a part 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 include that the company consistently has 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 Rex Tillerson, a move that was designed to avoid raising eyebrows on Wall Street. The new president, Darren Woods, is a 23-year company veteran and should keep the goliath on the steady path for growth and progress.

Exxon investors receive a sizable 3.87% dividend. The Merrill Lynch target price is $100. The Thomson/First Call consensus price objective is $82.86. Shares closed Tuesday at $76.70.

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