Gabelli Asset Management On Oil Stocks: Go Small Or Go Home

But not yet for God's sake. As we've been saying for going on a year now:

It's too early.

From Moneybeat July 31, 2015:
Oil Minors Over Majors, Says GAM 

The slump in oil prices has been brutal and is showing no signs of slowing. Brent crude is down an additional 1.2% Friday, taking its price per barrel to below $53. So far this month, it has tumbled more than 17% in value. Over the last year, the price has halved.

So has this created any opportunities for bargain hunters?

Roberto Cominotto, an investment manager at Swiss investor GAM says yes, but only if you go small.
“Second quarter results for the big integrated oil and gas groups – including Royal Dutch Shell PLC  and BP – reveal the harsh impact of the collapse in the price of oil over the last 12 months. While some of the losses have been offset by higher margins in refining, the growing issue of overcapacity means that this safety net could be short lived.  We fail to see any strong grounds to buy oil majors,” he writes in a note to clients.
“Nevertheless, the energy sector provides attractive investment opportunities, even with oil prices significantly below $100 [per barrel],” he adds.

He urges those looking to enter the market through equities to cast their attention to the small- and mid-cap producers, which have much lower production costs than their larger peers. He singles out names in the North American shale oil and gas production sector: Memorial Resource Development Corp, Cardinal Energy Ltd. and TORC Oil & Gas Ltd.

“These companies can grow even with oil prices at current levels. They can also finance investments and dividends with operating cash flow, and make acquisition,” he writes.

He says that they even though share prices of some of these companies have fallen just as much as share prices of the majors, they are still sitting on very strong resources and balance sheets and would even be able to fund capital expenditure if oil prices sink to $50.

He also says that he sees some opportunities to buy stocks in the renewable energy space, “especially in the U.S. solar market and the wind market in emerging economies.”

Nonetheless, consensus is that there is still plenty of reason to be super cautious when it comes to commodities.

Morgan Stanley strategists write in a note published Friday that “the backdrop’s pretty much ideal for another sell-off” in commodities and they go on to explain that “China’s massive equity market suddenly began shrinking really quickly.”...MORE

 We use the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) as our proxy for the smaller companies and as of yesterday it was still setting new 47 month lows:

Finviz

With oil up a couple percent today, the ETF will probably trade up but there is no reason to think yesterday's $36.95 low print was the bottom.