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Sunday, November 30, 2014

What sectors to benefit from declining cheaper oil?

Further to the topic on the crashing oil, one certainly will be interested to know which sectors will usually benefit from it. The most obvious one is the airline business. That's why you will notice that the stocks for airliners are generally reacting very positively to the declining oil. The problem for airliner stocks is that it is very cyclic and sensitive to the oil. In the past 1-2 years, the sector overall has advanced so much that the remaining momentum for them is likely limited. If you are purely a trader, you may make some money with quick short-term trading but the risk is quite high. A much better sector is probably the retail business, especially those big ones which have to consume huge amounts of gas for transportation. I have talked a lot about Target (TGT) lately. Warmart (WMT) is another big beneficiary. Both of them are good ones for long-term investment, especially TGT valuation-wise. There is another one that I have never talked about but a great stock to own: Sysco Corporation (SYY).

Sysco is the largest US company for transporting food-related products, not only in the US, but also in a few countries like Bahamas, Canada, Republic of Ireland, and Northern Ireland. It is definitely dominating in this industry and it is very friendly to shareholders by consistently paying increasing dividends for over 30 years or via buy-back of stocks. Its current dividend yield is 3%. Looks like SYY is just breaking out its all time high now. This is a good sign that SYY may start its next leg of moving up. In any case, SYY is a stock you can buy and forget and sleep well at night.

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