Invest In These 4 Large-Cap Oil Stocks

The oil market has finally recovered from their historic lows with prices stabilizing above the $50 a barrel threshold mark. The commodity pricing environment has been improving, courtesy of tightening supplies, rising demand and OPEC-deal extension talks. Recently, crude touched $58.02 per barrel, higher than last year’s average mark of $43.29, per the U.S. Energy Information Administration. The benchmark was buoyed by the fact that commercial inventories actually dropped after notching up successive weekly builds, as per the U.S. Energy Department's inventory release.

Adding to the positive momentum, OPEC and fellow exporters announced plans to remain open to extend their production-cut agreement beyond March. Some cartel members, including less compliant nations like Iraq, have also signaled another round of supply cuts. Energy bodies OPEC and IEA recently raised global oil demand forecasts for the year, helping to tighten the market significantly.

All these factors point toward the growing stability of the oil industry for the balance of 2017, and buoy optimism for the industry’s growth in 2018.

A Guide to Judicious Investment

While some investors prefer to maximize value by investing in smaller companies due to potential growth opportunities, others prefer companies with a greater market cap which can provide a safer, more consistent investment. These large cap companies enjoy leading market positions, have a global footprint, strong cash positions and are large enough to remain stable even in the face of unfavorable events. These stocks prove to be more sustainable and profitable for the long-term providing a reliable backbone to any portfolio. These firms also pay high dividends which provide the investors with a steady stream of income, which can easily be reinvested in an effort to boost returns.

With the help of our Style Score system, we have identified four large-cap stocks which are also value picks. Value investing offers an opportunity to enter the market and pick stocks that have otherwise been overlooked by a majority of investors, and are thus trading at cheap multiples. Our research shows that stocks with Value Style Scores of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer great investment opportunities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

4 Valuable Picks

We have highlighted 4 large-cap stocks (which according to our model have a market cap of more than $5 billion) in the Oil-Energy Sector with Zacks Rank #1 or #2. Further these stocks provide a respectable dividend yield and carry a Value Style Score of A or B.

Headquartered in London BP plc (LON:BP) (NYSE:BP) , an integrated major, has a market cap of 131 billion and sports a Zacks Rank #1 and Value Score of B. Most importantly for income investors, BP currently offers a dividend yield of 5.98%, higher than the 4.3% yield of the broader industry, courtesy of the company’s secure and stable operations. BP has a strong portfolio of upstream projects that are expected to fetch significant cash flows. Followed by the robust third-quarter results, BP became the first European oil major to resume share repurchase since the 2014 oil slump.

China Petroleum and Chemical Corporation — also known as Sinopec (NYSE:SNP) — is a Zacks Rank #1 stock. The Chinese energy giant has a Value Score of A and a current market cap of $87 billion. The company’s dividend yield currently sits at 4.94%, higher than 2.2% yield for the industry. Sinopec has made major progress in identifying attractive and economically viable oil and natural gas reserves.

The company’s large scale oil discoveries, especially in the Shengli field and Junggar Basin, will support long-term production. Since 2015, the company’s cash balance has jumped from $1.6 billion to $24.3 billion reflecting balance sheet strength.

Exxon Mobil Corp. (NYSE:XOM) with a market cap of 343 billion and a Zacks Rank #2. ExxonMobil has a leading position in the energy industry owing to the size and diversity of its asset base, both in terms of business mix and geographical footprint. With a stable cash position, the company’s balance sheet is one of the best in the industry, reflecting declining debt load over the first nine months of 2017.The company carries a Value Score of B and a dividend yield of 3.8%.

Chinese state-controlled energy company CNOOC Ltd. (NYSE:CEO) which is a major producer of crude oil and natural gas and the only company permitted to conduct exploration and production activities with international oil and gas companies, offshore China. The company with a market cap of 61 billion flaunts a Zacks Rank #1. The low leverage and high liquidity ratios provide the company with ample flexibility to tap on growth opportunities. The company carries a Value Score of B with a dividend yield of 3.57%.

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