Second-Half Outlook: Energy

Geopolitical concerns could cause short-term stock-price fluctuations, which will give patient investors a chance to buy on the downturn

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By Mark Morrison

July 5, 2006 at 4:00 AM UTC

This article is for subscribers only.

Energy stocks ended the first half with such a bang that investors should be cautious placing bets in the second half. Thanks to a flurry of oil patch deals, culminating with Anadarko's $21 billion double-play to buy Kerr-McGee (KMG) and Western Resources, and to the price of oil once again topping $70 per barrel, the sector regained a lot of the ground lost earlier in the second quarter.

Many stocks approached their 12-month highs on June 30. So investors should be patient and wait for another major pullback (there have been a half dozen since the bull market in energy stocks launched in 2003) or pick stocks with absolutely rock-solid fundamentals.