Market Overview

Pro On How To Play Oil: Buy The 'Biggest Players'

Pro On How To Play Oil: Buy The 'Biggest Players'

Oil prices for May delivery cratered to negative $37.63 on Monday, but one investment pro still thinks there's an opportunity in the sector.

What Happened

Value investors are facing an ideal opportunity as the energy sector once accounted for 70% of the entire S&P 500 index when oil was around $100 a barrel, BK Asset Management managing director of FX strategy Boris Schlossberg said on CNBC's "Trading Nation." Today, that representation amounts to just 3%.

This "perfect mean reversion trade" would only work best by purchasing shares of the "biggest players," he said. Names like Exxon Mobil Corporation (NYSE: XOM) and Royal Dutch Shell plc ADR (NYSE: RDS-A) boast "the strongest" balance sheets in the industry.

Why It's Important

Companies like Exxon and Royal Dutch will be in the ideal position to leverage their balance sheets and acquire "assets incredibly cheap," Schlossberg said.

The oil sector is "really far from bullish" and investors should consider selling any energy stocks on strength or avoid altogether moving forward, Oppenheimer head of technical analysis Ari Wald said on "Trading Nation."

The entire energy sector is coming off its lowest level since 1931 versus the S&P 500, which implies there are "more attractive opportunities" elsewhere.

Related Links:

The Historic Trading Action In Oil, Explained

PreMarket Prep Stock Of The Day: Chevron Corporation

Photo credit: Minale Tattersfield, Flickr


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