Choosing oil companies to invest in wholly depends on the kind of risks you can live with. Here’s what you can do to pick the best possible ones out of the pile:
Determine oil price stand point
How much is a barrel of oil now and how much will it likely end up at? Since global demand and supply affect the answer on a major level, you’ll need to consider those two factors. Other important things to consider too are OPEC production decisions and price trend of oil. The dollar’s strength is going to matter as well, U.S. News says.
Look for upstream assets
Keep an eye on venture capital funds that are all about buying upstream and midstream assets. It’s an excellent, tried and tested way of taking advantage of the devalued oil industry. If you have funds at your disposal, you’ll want to spend them on investing in one of these venture capital funds.
Equity vs growth capital
Decide if you would rather invest in companies on shaky, financial ground. You could purchase the debt from the operating company. It’s a good tradeoff since you’ll get an excellent equity position in return. However, if that doesn’t appeal to you, you could always buy stock from a good company.
Decide on long or short term
Many times, buying ETFs means you’ll have to be ready to move the commodity within less than 30 days. If you want to keep those contracts longer, though, it might be better to ditch the ETFs.
Check for revenue growth
A good choice for oil companies to invest in are those that experience good revenue growth. It makes for a stable and safe long-term option for investors. Just make sure you consider the kind of assets the company has and if those assets can survive well into the long-term. That should give you a sense if you and your money should stay or go.
