July, August and Oil
By Dian Vujovich
The first trading day of August was nothing to crow about. Then again it’s only one day.
First, some numbers.
Taking it from the top, Apple, closed today, (8/3/15), at $118, below its 200-day moving average. Crude oil ended the day down at $45.17 a barrel and Brent below 50 bucks.
The three major indices all closed down as well: The DJIA down over 91 points; the S&P 500 off 5.8; and NSDAQ down 12.90, according to Bloomberg.com
As for July, it closed the month with each of those indices gaining a tad; the Dow up 0.4 percent; the S&P 500 up 2 percent and NASDAQ up 2.9 percent, according to ZACKS.
Dragging in another source, SeekingAlpha.com reported the top-performing ETFs were Consumer Discretionary (XLY), Consumer Staples (XLP) and Utilities (XLU) all gained over 5 percent. On the other hand, Energy (XLE) and Materials (XLB) were down 5+ percent.
And then there is August’s historic performance research
At Yardeni Research, yardeni.com, are a couple of bar charts showing how the S&P 500 has performed each month beginning in January 1928 thru June 2015. Provided the data is accurate, the S&P 500 has been up more times than not during August. We’ll see.
Back to oil
The sign at that always so very expensive gas station off the exit on PGA heading east showed a gallon of regular gas selling for $2.90, or was it $2.99? Whatever. The point is, I haven’t seen gas that cheap at that station for I can’t tell you how long. Down in my neck of the woods a gallon of regular is selling for about 50 cents less.
Right along with the delightful price of gas comes with what some might consider an investment opportunity: With oil cheap, dividend yields on big oil companies look terrific. But there’s always more to a stock than its price or dividend yield.
For instance, on Friday Chevron (CVX) posted its worst quarterly profit in 13 years. The stock closed today at $85.60 a share snuggling right up to its 52-week low of $85.32. Its 52-week high was $129.53. The dividend yield on CVX, based upon today’s price, 4.70 percent.
Exxon Mobile (XOM) closed at $78.08 with a dividend yield of 3.70 percent today. Its 52-week high and low was $100.43 and 77.63 respectively.
I didn’t single out those two companies for any specific reason other than they are well-know names and to make this point: As tempting as jumping into the oils can be, a couple of things to remember before doing so begin with answering questions like these: Could these prices have further to fall? Any chance the company could cut its dividend? And what’s likely to happen if interest rates were to edge up this year?
I seriously doubt that the latter will happen. Nonetheless, the sector holds appeal for investors looking for income, value buyers, those who seek up-side opportunities and who don’t mind participating in the when-to-catch- a-falling-knife game.
To read more articles, please visit the column archive.