what to do with cop?

[Joey Batz]

I'm wondering what to do with my shares of COP?

I bought the company back when things were good, getting in at $68/share a few years ago. Oil was at record highs. Now, the stock is down to $50/share and the dividend was cut last year. My current paper losses are $500 (not counting the dividend coming in).

Now I was considering selling off my stake in the company, taking the loss for tax purposes (it would offset the gains I had on just selling half my stake in CAT a week ago), and routing that to other dividend payers. I don't remember what the yield was at the time of purchase, but with the dividend cut, I'm pretty sure that the current YOC is pretty low. The thing is that I hate to sell off a company if the fundamentals are fairly decent. I'm pretty sure the company isn't about to go under (though, then again, they have a negative EPS. How are they paying that dividend?). Plus, they are committed to paying that dividend and, if I'm not mistaken, they've grown their dividend at least once since the cut. And they have a nice history of paying and raising their dividend.

We don't know what oil prices are going to do, but they've rebounded from the record lows of two years ago. If there was reason to believe oil was going to shoot up, I'd consider investing more in COP (being a pure play upstream, the upsides for that are huge). But I haven't a clue what commodity prices are going to do and neither does anybody.

So I was wondering what your thoughts were on what I should do? Sell off my shares for tax loss purposes and reinvest the money into another dividend stock (my current plan)? Just hold on and hopefully enjoy a resurgence of the dividend? Just hoping someone could point out something I'm missing or help me put this stock into perspective.

[ChadR]

I'm probably not the best one to ask since I sold my shares of COP about 6 months after the dividend cut. I'd vote for selling, but my track record for selling isn't the best since the stock usually does better after a sell.

[divmenow]

COP is in an uptrend now. Why sell it? You have to think about if you sell it what would you put it into? Oil is one of the few sectors who hasn't participated in the 2 year bull market rally until the last month or so. Oil could either breakout of head back to that $45 barrel level or so. COP has had a nice rally and sure it could pullback to $47 or so. But the upside is far greater then the downside. I say stick with the name.

[chascornell]

I say don't sell because the lower the stock price gets the more shares your dividends are earning if you do the drip. Gas won't be 2 dollars a gallon forever. You will be glad you kept them when it bounces back and you have much more to show for it.

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[Joey Batz]

I see what you guys are saying.

I actually do have some ideas for where to route the funds from the money (other dividend stocks, not a fancy car or iPhone or anything ), and like I said, the tax lost harvesting will also make up for my selling half of my CAT stake a few weeks ago.

Looking at some of these numbers, though, makes me wonder if money is better allocate elsewhere. Right now, I'm seeing a NEGATIVE EPS. I don't recall any major acquisitions or anything that would have created more spending than revenues (correct me if I'm wrong); I'm fairly certain they actually sold some assets this year. How am I seeing negative earnings? And their forward P/E is very high too. That indicates overvaluation to me. I know that oil prices won't stay where they are forever, but who knows where things will be for the next foreseeable future (roughly 10 years)? I don't want to start making any bets on commodity prices other than the broad fact that we will still be using that commodity 30 years from now. I don't think oil is going to crash again, but do we really think it will go up to the record highs of 2013 as the technology for drilling improves? I don't think so, and remember that this is a pure play upstream company here.

I should also point out that the companies I'm thinking of to buy have higher yields and lower forward P/Es.

What is it I'm missing here with these numbers, guys? What am I REALLY seeing when I look at COP's negative EPS and near-30 forward P/E?

[EricL]

(10-04-2017, 04:43 PM)Joey Batz Wrote: I see what you guys are saying.

I actually do have some ideas for where to route the funds from the money (other dividend stocks, not a fancy car or iPhone or anything ), and like I said, the tax lost harvesting will also make up for my selling half of my CAT stake a few weeks ago.

Looking at some of these numbers, though, makes me wonder if money is better allocate elsewhere. Right now, I'm seeing a NEGATIVE EPS. I don't recall any major acquisitions or anything that would have created more spending than revenues (correct me if I'm wrong); I'm fairly certain they actually sold some assets this year. How am I seeing negative earnings? And their forward P/E is very high too. That indicates overvaluation to me. I know that oil prices won't stay where they are forever, but who knows where things will be for the next foreseeable future (roughly 10 years)? I don't want to start making any bets on commodity prices other than the broad fact that we will still be using that commodity 30 years from now. I don't think oil is going to crash again, but do we really think it will go up to the record highs of 2013 as the technology for drilling improves? I don't think so, and remember that this is a pure play upstream company here.

I should also point out that the companies I'm thinking of to buy have higher yields and lower forward P/Es.

What is it I'm missing here with these numbers, guys? What am I REALLY seeing when I look at COP's negative EPS and near-30 forward P/E?

COP is in a cyclical industry, and that industry is in its 3rd year of a downturn. I think we are close to a point where prices are headed higher, but in the meantime the E&P companies are going to continue to tread water. Once crude prices head higher, those EPS estimates will rise accordingly, and the PE will shrink.

I think COP is a decent enough company, but I prefer those with more exposure to the Permian like EOG or OXY or the integrated oil companies like CVX or XOM. None of them cut dividends, and OXY, CVX, and XOM have all continued to raise payouts during the recent downturn.