It seems a lot of people on Wall Street have turned negative on oil. Man, I think that view is wrong. And if you want to bet against the bears — and get paid to do it — I’ll show you my “secret weapon.” One stock that weapon likes is MPLX LP (MPLX), writes Sean Brodrick, editor at Weiss Ratings Daily.
Oh, okay, the weapon is not THAT secret. It’s the Weiss Ratings. But it boggles my mind how few investors use this amazing tool. And I’ll tell you how Weiss Ratings can help you pick the best-paying oil stocks.
(Editor’s Note: Sean Brodrick is speaking at the 2024 MoneyShow Orlando, which runs Oct. 17-19. Click HERE to register)
First things first. In October, OPEC+ will revisit the output cut of 543,000 barrels a day they implemented earlier this year. Big banks like Goldman and JPMorgan believe OPEC+ will open the spigots. I see that as very unlikely. OPEC leader Saudi Arabia needs higher oil prices to avoid budget deficits caused by all its spending on megaprojects and social safety nets. They’re going to extend at least most of those cuts.
The other factor is China. Its economy is weakening. That’s important for oil because China is the second-largest consumer of oil in the world. It consumes 16.6 million barrels per day, about 13.2% of the world's total consumption. And it accounted for roughly 40% of oil demand growth in 2023.
But the market seems to be pricing in an even worse slowdown for China. Again, that seems unlikely. China is establishing new free trade zones, streamlining customs, and promoting growth policies. China has also rolled out a new policy to encourage more than $700 billion in annual spending on equipment upgrades. That alone could add half a percent to GDP growth.
Plus, there are a lot of things that can go wrong with the global oil supply. You always want some exposure. But it’s good to be paid while you wait for oil investments to work out.
The way to do that is by picking up oil stocks that pay fat dividends. The Weiss Ratings helped me zero in on MPLX, an oil and gas midstream company that recently yielded 7.9% and has a Weiss Rating of “A-.”
Let’s see how MPLX has performed compared to the S&P 500 year to date.
The S&P 500 is up 18% since the start of the year, which is VERY good. But MPLX is up 23% at the same time - AND you get a fat dividend to boot!
Something else to keep in mind: When those on Wall Street get loudly bearish on something, they usually want weak hands to sell their shares. I think that is what’s happening with oil. China’s economy will improve, and OPEC+ won’t want to boost production and see a resulting fall in prices. Oil stocks that pay fat dividends are a great place to park your cash while you watch the action.
Recommended Action: Buy MPLX.
