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Martin Tillier

Martin Tillier

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One To Buy On The Dip

The last month or two have seen energy stocks, and oil and gas exploration and production (E&P) stocks in particular, become the victims of a “perfect storm.” Oil prices, on which the value of their assets is based, have been steadily falling. The stock market in general has been under pressure as traders anticipate the end of Quantitative Easing by the Federal Reserve, which also raises the prospect of higher interest rates. That is bad news for E&P companies that are generally quite highly leveraged due to the high upfront costs of acquiring land and then drilling for oil and gas. With their assets losing value, their stock being dragged down by general market weakness and the prospect of higher borrowing cost on the horizon it is little wonder that most have fallen precipitously.

When faced with a falling market such as this, however, investors would do well to heed the words of the “Sage of Omaha”, Warren Buffett. He once famously said that we should be “…greedy when others are fearful…” and on a Thursday morning appearance on CNBC’s Squawk Box he showed what that means. Buffett revealed that his Berkshire Hathaway (BRKA; BRKB) had been buyers during the big drop on Wednesday. When asked if he was worried that the market would continue to fall he responded that the opposite was true. He hoped it would fall further so that stocks would be even cheaper next week.

Of course, not all of us have the…

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