The only way of finding the limits of the possible is by going beyond them into the impossible - Arthur C. Clarke
When you go to trade Canadian oil stocks, you will need to look at several things before committing your money into this investment. You just don’t want to guess at which stock to buy, or to invest based on hunches.
Before buying oil stock, you will need to look at several things.
Is the political climate good for oil companies?
Drilling for oil takes place all over the globe. Some areas of the world are riskier fro oil companies than others. In democratic countries there is a rule of law that everyone understands. This makes investing in those countries less risky. In countries with dictatorships in which they can seize and nationalize an oil company, then clearly your risk is greater.
What is the revenue to debt level?
When you start looking into oil stocks, the first item you should look at is the balance sheet of the company. What is its level of debt? What is the company’s revenue? Is it enough to safely pay the debt off? You do not want an oil stock that is burdened with too much debt.
Follow the earnings.
The key to stock selection is if the oil company is making money. By researching the stocks annual report, you will be able to see its income and expenses over the last few years. This can give you an indication if the company is growing or if it is in decline.
Selecting the best oil stocks
After you complete your research and whittled down he oil stocks you are interesting in buying, you should rank them and then choose your top 5 to buy into. You can do this a number of ways. Do you want dividend paying oil stocks? Then perhaps you can rank them on yield or on how long they have been paying dividends. Find a way that works for you.
After ranking the oil stocks you want to invest in, figure out what your buying point will be. Give yourself a range in which you will pay for a stock. Do not get caught up in bidding up a stock to buy. Be patience and only buy at a price that makes sense to you.
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