An oil risky bet – a potential 3 bagger

Occidental Petroleum

Occidental Petroleum(OXY) a very well known oil & gas US company, now at 12.0, has seen its stock price drop by more than 85% since mid-2018 due mainly to costs associated with its acquisition of Anadarko Petroleum. Mid January the price was at 46 USD with a very generous dividend of 3.15USD/share/year. The latest news about the oil wars & the Corona virus hit very hard the stock and pushed its price even below 10 USD.

If we assume no further significant decline of oil demand globally, our model predicts with >70% probability that the price will surpass the 20USD level within the next 3-6 months & possibly surpass the 30USD level in a 1-2 year horizon. That’s a more than 45% – 80% performance in some months. Our model took into account an oil price recovery for the 3rd – 4th quarters of 2020 to the 40 – 50 USD/barrel levels.

Although oil prices will probably be under pressure for some more time , especially if the Virus epidemic retreats , some long positions in oil names like OXY have a great chance to give excellent returns to patient investors.