China Buys Record Amounts of Oil

Making money in stocks is about the easiest thing you can do.

In terms of time spent to money returned, it’s right up there with being a supermodel or a rock star. 

And it all boils down to one simple plan: Buy low and sell high.

The funny thing is that, by definition, most people don’t buy low.

If they did, it wouldn’t be low.

Let me give you a couple of examples…

BP’s Back

Remember that oil company that used to be known as British Petroleum, but that is now known as BP?

They had a problem with a leaky well in the Gulf of Mexico.

Obama said he was going to stomp on their neck, or some such schoolyard nonsense.

Every hack at the New York Times wrote long, disparaging essays on the evil of hydrocarbons.

Analysts said the company was facing bankruptcy…

Well, that company just raised its dividend. 

According to the BBC:

BP has raised its dividend to shareholders by 14%, the first increase since the 2010 Gulf of Mexico spill, following sharply higher profits.

Replacement cost profit, which is profit stripping out the effect of oil and other price movements, for the three months to the end of December 2011 was $7.6bn (£4.8bn).

This compares with $4.6bn for the same period in 2010. For all of 2011 BP’s profit was $23.9bn compared with a $4.9bn loss in 2010.

If you had bought the fear at its highest — when the stock was trading at its low of $27 last year — you would have made 72% gains (plus div).

The stock has bounced back and is now at $46.50. Not bad for one of the global majors…

Whatever Happened to Netflix?

Just a few months ago, the CEO said he was raising prices by more than 50%!

The Internet went crazy.

Basement dwellers, grad students, and bloggers everywhere said Netflix blew it.

But I did the math and realized that if Netflix lost 10% of their subscribers, they would more than make up for it in increased revenue. 

In fact, it’s a gold mine:

There was plenty of time to buy as the stock flattened out at $70, or even on the breakout at $80 in January. 

The stock is now at $133 and headed back to $300, all the while gaining new subscribers and pulling in record revenue.

Or Intel?

Or how about Intel, which I started telling you about back when it was trading at $17 and paying an 8% dividend.

Now it’s paying a 3% dividend — not because the payout went down, but because the share price went up to $27.

You can’t buy low and sell high unless you buy low.

So, what is low?

Think about what stock or sector most people don’t want to own right now: Housing? Solar? Copper? 

Yes, you’d be on the right track with most of those ideas. But the trick is to catch the stocks after they’ve bottomed and are starting back up. 

You don’t want to grab a falling knife or step in front of a freight train.

And it’s always a bad idea to buy a product that has to be subsidized.

That said, let someone else find the absolute bottom. A good investor will wait until there is new uptrend or a breakout.

What’s Low 

Right now, the one place most people won’t invest is Africa.

Saying you like Africa is like saying you’re buying Haitian penny stocks for dot-com companies. Most people wouldn’t even think about investing there.

And this despite the fact that the Economist said sub-Saharan Africa will be the fastest growing region in the world next year. 

China isn’t so squeamish. They’re going after resource-rich Africa whole hog.

You see, the United States is enforcing tough sanctions on Iran, a place where China gets its oil…

Don’t get me wrong; China doesn’t care about U.S.-Israeli relations. No, Iran has some problems with paying off debts and supplying the oil it had promised.

You add in the possibility of a war, and China thinks it’s better to buy oil from Africa.

According to the Guardian:

Asian imports of West African crude oil will hit an all-time high in the first quarter as purchases of Iranian oil decline and as Chinese and Indian refiners build stocks from alternative sources, trade and shipping sources said.

The region is a natural alternative source of oil for Asian buyers who wish to avoid sanctions imposed by the West over Iran’s nuclear program that the United States and its allies say aims to produce Iranian nuclear weapons.

Africa is cheap.

African oil companies are doing very well. I know one mid-major that said they will double production within five years.

A smart man might want to buy while it’s low.

Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.