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July 18, 2005
Summer Oil Prices
The folks at U.S. Global Investors, which manages $2.2 billion, much of it in natural resources stock funds, are big believers in looking at historical cycles to determine what might happen in markets this year.
So they take great interest when research turns up a correlation like this one: It turns out that for the past 20 years, July, August and September are the months when the price of crude has risen the most on average (by 2.36%, 2.79%, and 4.98% consecutively). That's in good part because it is hurricane season and the time when offshore rigs and oil shipping platforms in the Gulf of Mexico often get shut down (as they are now, thanks to Emily). It's also peak driving season as well as a time when air conditioners are fully cranked up.
Does that mean this is a good time to buy oil stocks? Not necessarily, says Frank Holmes, the owner of the San Antonio (Tex.) firm as well as the chief investment officer.
Instead, it indicates that this is a good time to take profits and raise some cash, as he is doing now in the Global Resources Fund (PSPFX) fund. That way, he'll have cash on hand to buy back in at cheaper prices in the months when oil prices typically decline -- October and November (by 3.08% and 3.01% on average).
For investors that want to buy an oil stock now, he says, "be careful and selective." He suggests purchasing Royalty Trusts, which have dividends well over 6% and make up about 25% of the fund.
Three to consider: San Juan Basin (SJT), BP Prudhoe Bay (BPT), and Enerplus Resources Fund (ERI).
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