Monday, March 02, 2009

Weekly Stock Pick

Buy Sell Hold
It’s another Monday, and the financial news looks like this. AIG is supposed to get another $30 billion in bailout money, HSBC has some more you know what write-offs, employment is looking worse than ever, Warren Buffett said he did “some dumb things” in 2008, Citigroups rescue plan may not be enough, dividend yields are getting slashed, and the USA recession seems to have no end in sight yet. Where do you put your money for a good return on investment with minimum risk in an environment like this? My answer this week, is on the other side of the world.

Scanning the stock charts this Monday morning, I’ve zeroed in on a low-risk high-reward buy long trade on a big oil company in China. Last week oil prices fell about 1 percent with U.S. data showing the consumer sector shrank more than expected. On the other side of the world, I’m betting China’s oil demand will remain relatively high compared to the USA throughout this year, and increase more moving into future. If you’re a dividend buyer then you’ll be glad to hear this company is currently paying out a 5.39% yield.

Buy Long Sinopec Shanghai Petrochemical. Ticker SHI

Buy Entry: 22.24 to 22.86

Stop-Loss: 22.14

Take Profit Areas: 23.48, 24.10 to 24.72, 26.62 to 27.27, 27.62 to 28.29, 30.05 to 30.79, 35.05 to 35.90

Sinopec Buy Long Analysis

Purely technical. Forecasting fundamentals in an economic environment like this is a waste of time energy and money. For the fundamentalists out there, take China’s 1.3 billion people, and add that into your analysis. China, along with India’s 800 million people or so, have exponential amounts of more people and associated growth and demand. Compare that to the USA and Europe after World War II. If history repeats itself, the growth in the Asia region this century is going to be 5 to 10 times the growth of what the USA and Western Europe did last century. This trend is already set and in place. Simple supply demand ratio going on there.

Current Oil News and Analysis

Oil pulled back on Friday possibly brought down by USA consumer data that showed a decrease in consumption for the last quarter of 2008. U.S. light sweet crude closed at 44.76. US GDP decreased 6.2% which was more than the 5.4% concensus amount analysts were looking for. Looks like maybe the oil markets are taking notice of the economy again. Global demand for oil right now is decreasing. America’s demand for oil is at a 10 year low. OPEC is cutting back on production to try to support oil prices. Time will tell who wins the oil supply demand equation.

Sinopec Company Profile

Sinopec Shanghai Petrochemical Company Limited (SPC) is a petrochemical company in the People’s Republic of China. The Company produces over 60 different types of products, including a range of synthetic fibers, resins and plastics, intermediate petrochemical products, and petroleum products. The petroleum products and intermediate petrochemical products produced by the Company are used primarily in the production of its own downstream products. SPC, through its parent company China Petroleum & Chemical Corporation, is also engaged in activities, which includes exploring for, extraction, production and trading of crude oil and natural gas; processing of petroleum; production of petroleum products, trading, transportation, distribution and sales of petroleum products; production, distribution and trading of petrochemical products. The Company principally operates its business in four segments: synthetic fibers, resins and plastics, intermediate petrochemicals, and petroleum products.

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Click the Sinopec Shanghai Petrochemical Stock Chart for a larger view.

Sinopec Stock Chart