Oil Still Gold
Russian President Vladimir Putin discussed the falling capitalization of Russian oil companies with members of the government last week. He is not the only one concerned with that issue. Merrill Lynch analysts Karen Olney and Charles Cara have written a special report on oil and natural gas explaining why the bank holds more stock in that sector than is generally considered safe. The report considers long-term growth, dividend income and the performance of various sectors of the European stock market in the last 16 years.
The findings of the study differ significantly from market wisdom. It notes that, in current market conditions, oil and gas rank second, after telecommunications, for undervaluation. Most analysts consider telecommunications overvalued, however. Construction, chemicals, electricity and retail, the four main targets of Russian investment in Europe, are seen as overvalued in the long-term perspective.
Olney and Cara point out that oil and gas have excellent mid-range prognoses. That stock also has a low level of volatility. Investors in oil stock are conservative and unwilling to take risks, they say. They praise Statoil, BG and OMV stock for its stability and recommend ENI and Shell as well.
www.kommersant.com
All the Article in Russian as of May 29, 2007
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