Oil Is No Longer Leading

 | Aug 12, 2014 | 1:15 PM EDT
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Oil has really lost its mojo for now. We are dealing with the possibility of an oil glut that's worldwide, and all that can keep it up are geopolitical tensions, and even those don't cut it, because they drive up the dollar, which drives down oil. The International Energy Agency spelled out the glut in no uncertain terms, making it clear that there's so much flowing that you don't need to worry about a potential geopolitical event driving oil up.

In other words, the independent oil companies, which have been such good leaders because they have such high growth, have suddenly taken a step back as a place to be.

And for the moment, the production growth is working against these companies, because there is a perceived surfeit in this country that makes it so we could see oil go down to a price where we begin to worry about margins again.

Plus, it is awfully hard to get excited about the drillers and service companies when Schlumberger (SLB) is cutting its own numbers because of Russia.

Last week we sold our Marathon Oil (MRO) for the Action Alerts PLUS portfolio, and we trimmed Anadarko Petroleum (APC). I found both painful, because they have huge growth, much better than the growth you are getting from Chevron (CVX) or Exxon Mobil (XOM). But the demand side is teetering for the moment, so it doesn't matter.

I say that for now, you have to be careful of this group. Buy them lower and later when you get the chance. And you should do so, because these companies are worth a ton of money to other companies that need growth in the oil patch, companies such as Statoil (STO), Chevron, even Exxon Mobil.

This loss of oil leadership means you have to be careful of the industrials, the banks and the oils, not to mention the highest-growth stocks such as Kate Spade (KATE), but that's for another piece for another moment on what is turning out to be a very busy day. 

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