Higher oil prices

Very few economists were predicting oil prices around 60.00/barrel 12 months ago. Now that they have arrived, stocks are suffering:

“People need a good reason to buy stocks, but they always have reasons to sell,” John Waterman, chief investment officer at Rittenhouse Asset Management, told The Associated Press. “We’re seeing mixed economic data, high oil prices, so where do you put your money? Investors chase momentum, and there’s none here.”

Considering the energy situation, here’s a nice look at some energy stocks and the related economic issues in India.

It’s interesting to me that with the higher oil prices we see some people calling for a switch from value to growth investing. It seems that some investors think that earings growth will slow overall so that the focus needs to be on the companies with solid growth:

Large growth stocks have been especially weak during the past five years, Conrad Herrmann, manager of the California-based Franklin Flex Cap Growth Fund said during a recent stop in Phoenix.

“That’s where we’re finding good opportunities,” he added.

Herrmann cites firms such as Pfizer, Johnson & Johnson and Amgen, traditional growth companies that now resemble value plays. Other growth bellwethers with modest p/e ratios include Microsoft, General Electric, Citigroup, Home Depot and Wal-Mart Stores.

Millen cites Johnson & Johnson as an example. The company’s per-share profits rose 18 percent in 2004 – the 20th straight year of double-digit increases – and that paved the way for dividend increases.

Although value stocks have enjoyed an edge during the past five years, some observers see the scales tipping back in favor of growth. Herrmann says a slowing economy could be the catalyst.

“I think we’ve seen the peak in the (overall) growth of earnings,” he said. “Investors now will need to focus on companies still able to generate good growth.”

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