Should You Buy Oil Search Limited At This Share Price?

What happened to the OSH share price?

Oil Search Limited [ASX:OSH] has been a rock-star performer over the last 13 years. That seemingly unbreakable fortune broke this past year with the collapse of oil price. It didn’t matter how strong the fundamentals were at Oil Search, its stock price went into a change V-shape, heading south.

With the fall of oil, the celebration was over for long-hold investors. However, the party continued for long/short investors. Those are investors who are able to benefit from both the upside and the downside of an asset, so they enjoyed the downside just as much.

Oil is depressed

On the fundamental side, there is nothing new. Global demand has been repeatedly downgraded by the IMF and the International Energy Agency. Around the supply side, shale, OPEC and now Iran will continue to add to the stockpile. It seems absolutely hopeless for oil.

But investors must ask themselves: what can oil sink? Must i buy the dip?

I am the emerging market analyst from Port Philip Publishing. I operate a service called New Frontier Investor. I help my clients to invest in higher growth opportunities in emerging markets.

Despite the turmoil in China, many of our Chinese opportunities are still way above their entry points. Most of our ex-China investments are profitable. How do we achieve that? We bought low and held onto value.

As of late, I have been promoting depressed assets such as commodities and depressed emerging market stocks. I brought oil onto my list over the past dip a few months ago. Right now, I’m telling investors to buy much more. I brought Brazil to the list a few months ago. It is yet to turn around, and it is right now even more attractive than before.

I guess you can call that contrarian trading. The point is, I believe oil is not high enough for its long term fundamentals, so it will rebound.

What should you do with OSH shares now?

If you are a long/short participant, your 52 weeks rolling return should be near or higher the 10% mark. It has been taking advantage of a series of long positions in the market. For long-hold investors, you ought to have a longer term perspective. Picking healthy companies at the dip is the most profitable strategy you can have.

Ken Wangdong+
Emerging Market Analyst, New Frontier Investor