Part of my portfolio is invested in companies that are involved in one way or another in the oil and gas industry. I’ve seen the values of these companies, selling at extremely low valuations in relation to tangible book value, dip even further. All of the share price movement seems to be based on the movement of oil prices.
A Wall Street Journal article posted today shows Brent Crude oil prices are off 4.5% down to $49.84. This price is within $4 of its 6-year low. The gist of the article is that the supply of oil is continuing strong while demand is waning. There is a lot of uncertainty in oil and gas companies right now because of the depressed commodity prices. This has led to what I would consider very undervalued companies in the industry.
I can’t tell you when oil and gas prices will rebound, but eventually they will once the supply and demand imbalance is gone. When the commodity prices come back, I believe the oil and gas companies will follow suit. Until then, my money is in oil and gas companies with strong balance sheets that should be able to weather this storm.
Source: Oil Falls Below $50 a Barrel