TOT vs RDS-A – Which one is better?
Someone asked me which was a better stock to own, TOT or RDS-A. It’s an interesting question because the charts of the two stocks during the past year are almost indistinguishable, which implies that most investors perceive them as fungible members of European Big Oil.
My answer was that I prefer RDS-A (or RDS-B) to TOT because:
• RDS has a new CEO who is deadly serious about cost cutting while TOT is mostly just talking about it.
• TOT has a larger proportion of its production in OPEC countries, which subjects it to the cartel’s arbitrary supply limits.
• TOT is heavily involved in Russian NG projects, where I suspect it may end up getting hosed by Putin et al.
• RDS has more upside exposure to high-impact exploration. (For instance, TOT’s deepwater prospects in the Gulf of Mexico are in a 50/50 JV with a third-tier company called Cobalt because TOT felt it did not have the expertise to explore the Gulf on its own.)
The above is not to say that RDS is a great company or TOT is a bad one, but rather that I prefer RDS if the valuations are roughly comparable.
Comments from anyone?
“The efficient-market hypothesis may be
the foremost piece of B.S. ever promulgated
in any area of human knowledge!”
