Frank Curzio: Oil and Gas

The Energy Report: Frank, as editor of Penny Stock Specialist, you cover a number of stocks trading under $10. But you recently wrote a report on Exxon Mobil Corp. (NYSE:XOM) and its competitors for Growth Stock Wire. So, tell us what you specialize in.

Frank Curzio: I specialize in small-cap stocks, but it's very important to look at the big picture—the macro view—to get a good read on smaller companies. For example, most analysts are now lowering estimates on Exxon due to lower natural gas prices following its recent acquisition of XTO Energy Inc. (NYSE:XTO). We have an enormous amount of natural gas in the U.S.—enough to supply consumers for more than 100 years. And producers continue to drill. Just knowing that information through looking at some larger-cap companies makes me a little nervous recommending smaller-cap natural gas companies. As for Exxon, it's trading over 10 times next year's earnings—a little more than 2% yield. I'd rather buy Chevron Corporation (NYSE:CVX) or ConocoPhillips (NYSE:COP). They trade at a lower multiple, pay a higher yield and, actually, are growing faster than Exxon.

TER: Speaking of Chevron, its margins are pretty substantial with oil around $80/barrel. It's going to use some money to buy back shares starting in the fourth quarter. Chevron's one of a number of companies that has announced stock-repurchase programs in recent months. Do these buyback programs form an investment thesis among oil companies? (more)