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Oil and Mining Sector Broker Recommendations

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For those of you who like broker recommendations you will be interested to see what the brokers have been saying about the Oil and Mining fraternity.

I tend to look at trades from a spread trading point of view i.e. trades that I plan to keep open from anywhere between 1 and 30 days. The analysts are looking at shares and therefore looking at longer terms trends. It seems clear that they think that prices across the board will remain high.

Real long-term investors will no doubt see a few ups and downs but they are in it for the long game. They are investing in yield, prospects, growth etc.

So looking at a handful of recommendations of companies currently in the FTSE 350 there is:

JKX Oil and Gas. Goldmans Sachs have gone from Neutral to Buy. Likewise Jonathan Copus of Deutsche has increased his JKX target price from 580p to 755p.

Kazakhmys. Robery Clifford, also of Deutsche, has upgraded Kazakhmys from Hold to Buy with a new target price up from 1820p to 1900p.

Jonathan Copus has also increased his Cairn Energy (Buy) target from 3235p to 4290p and his Tullow Oil (Buy) target from 1070p to 1490p.

Elsewhere in mining and oil analysts have recently said: Premier Oil (Buy), Volga Gas (Buy), Imperial Energy (Neutral), Bunzl (from Hold to Buy) and Antofagasta (Buy).

But why? Far East growth may simply still outstrip any downturn in the West. That and the Supply / Demand equation often fails to work quickly with commodities. Supply is very difficult to increase and demand is almost impossible to decrease, at least in the short and medium term.

But what to do and what is the best way to trade? Well like the adverts say, if in doubt seek independent financial advice. As usual the best way of protecting your funds is not to trade. Apart from that common advice is to have a diversified portfolio. In this case perhaps a range of the oil and mining stocks rather than one or two.

Another way of looking at the data is to read that the brokers do not think that the current high commodities prices are just in a bubble. So with companies like FinancialSpreads.com or World Spreads you can easily gain exposure to the commodities themselves. These spread betting companies will let you bet on crude oil, natural gas, heating oil, copper, silver, gold, platinum, etc. Although as with all leveraged investments, you do need to be careful with spread betting. Also note that most commodities are priced in US Dollars and therefore the markets will often move purely on exchange rate data.

Spread betting carries a high level of risk to your funds. You can lose more than you initially invest. It may not suit all investors. Only speculate with funds that you can afford to lose. Ensure you understand the risks and seek independent financial advice if and when necessary.


About the Author

An experienced commodities trader and writer on the crude oil spread betting and mining futures.


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Article Published/Sorted/Amended on Scopulus 2008-09-02 22:28:22 in Business Articles

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