How to Survive the Coming Correction

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How to Survive the Coming Correction

Over the past five trading sessions, the VIX – or Volatility Index – has seen a major pickup, soaring by 25%. The meltdown began just over a week ago with the Nasdaq, which suffered its worst three-day loss since 2011.

Pundits have been piling on about overvaluation in the market, while other emerging markets, tension in Russia, and jitters about interest rates and local growth are creating a nervous environment for investors.

Personally, I’d like nothing more than a nice correction, painful as it would be on paper for a lot of people (myself included). You see, corrections present opportunity . . .  and you should be prepared with a list of stocks that would make you salivate if they hit your price target.

I’ve got a few on my “Buy” list in the energy sector, and today I’m going to share two of my favorites with you.

A Major Opportunity

The first is oil major, British Petroleum (BP), which began a mini-correction of its own about a month ago . . .  when the Russians decided to annex Crimea.

You see, BP is now a major stakeholder in Russia’s state-controlled oil company, Rosneft. Last year, the Russian oil company bought BP’s half of TNK-BP for billions in cash and a stake in Rosneft that’s worth billions more.

So when tensions rose between Russia and Ukraine, the spotlight was suddenly on BP’s connection . . .  and, as usual, investors sold first, then asked questions later.

That’s good news for us because, if anything, the situation in Russia and Ukraine will sustain volatility in the oil markets and keep prices higher. That means BP’s stake is worth the same or even more, not less. If no one was buying Russian oil, then perhaps there’d be cause for worry. But, the opposite is true.

BP also pays a hefty dividend of close to 5%. The fact that BP can pay such a high dividend – after spending tens of billions of dollars on the Gulf of Mexico incident – is a testament to the strength of the company’s operations and the value of its assets.

So keep an eye out, as BP would be a stellar pickup in the low $40s.

A Natural Choice

My next pick, Noble Energy, Inc. (NBL), continues to pick up steam and grow its earnings and reserves. Noble has operations worldwide, from the shale-rich regions in the United States, to the massive gas fields off the coast of Israel and Cyprus, where it has rights to drill.

It’s producing prolific amounts of gas in the Mediterranean, and that could end up being the “anti-Russia” play of the decade. You see, Russia supplies most of Europe’s natural gas right now, and that puts it in the catbird seat as far as economic leverage and price control. However, Noble is working hard at trying to change that.

It’s in negotiations with Australian company, Woodside Petroleum (WPL), to develop LNG export facilities that would get gas to Europe and penetrate the Russian shield. Pipeline construction projects are in the works, as well. That makes Noble a great pickup in the high $50s to low $60s.

Bottom line: As investors, we must be prudent with our hard-earned dollars. Right now that means taking advantage of a correction, rather than fearing it. Corrections are like sales right after the holidays… something to look forward to when you’re seeking values and bargains!

And “the chase” continues,

Karim Rahemtulla

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