Los Altos Town Crier » As oil prices rise, consider buying oil stocks that pay dividends

By Clyde Noel

Image from article As oil prices rise, consider buying oil stocks that pay dividends

When you talk stock market, preservation is on the minds of most investors. Many are experiencing portfolio pain and can’t take it anymore.

The big concern is the price of oil and whether it will reach $50 per barrel. If it keeps rising, economic growth will be weaker than expected. Crude oil prices, plus worries about the economy and outlook for earnings, are expected to hang over the market for the rest of the summer.

There is a great deal of pessimism in the market, weighed down by climbing oil prices, anxieties about inflation, interest rates, terrorism and the coming election.

Last week the Dow industrials rose 0.10 percent while the Nasdaq fell 1.07 percent. The Town Crier index fell 1.0 percent and is down 18.42 percent for the year.

Cautious comments by the chief executive of Cisco Systems Inc. and profit warnings from other technology companies including Hewlett-Packard unsettled investors during the past week.

The close presidential race has caused tech companies with money to postpone spending on capital expansion because of the uncertain election outcome. What you read in every tech earnings release is corporate spending has been postponed.

So where do we go from here? Market experts say it would be a mistake to sell off equity funds now. If you’re dollar averaging and adding to your portfolio regardless of where the market goes you wind up buying shares at lower prices.

Protect your portfolio by buying value stocks. They have a higher dividend payout, less volatility and a lower P/E valuation for risk to your 401(k) Now might be a good time to add value with higher dividend paying and higher quality stocks that are lower in price.

Large cap value is the safest investment right now and only companies that are profitable and pay dividends. Energy stocks are surging because of rising crude-oil prices.

Maintain some exposure to the best performing sector in the Standard & Poor’s 500, the large, integrated oil companies such as BP P.L.C., Exxon Mobile Corp. and Chevron/Texaco Corp. They are insulated from risk because their operations cover everything from exploration, drilling and refining to marketing at the gas station where you fill your tank.