Comparing Stocks and Investment Options In the Same Sectors

You can use information about another company to help analyze an investment option (or potential investment). This might sound a bit confusing at first, but it really makes a lot of sense in the end. If you are considering investing in an oil company — a popular idea with today’s rising oil prices — you need to see how your particular choice stacks up against the competition. That way you can compare “apples to apples” so to speak.

To follow along, I would suggest opening a browser and looking at Yahoo Finance, selecting XOM as the company symbol. After entering XOM, you can look at the left column and select “profile.” In the profile you will see that the industry XOM is associated with is “Major Integrated Oils and Gas.” If you then go into the “Leader and Laggard” section, you can see the companies that are leading that field. (These leading companies may be stronger investment options.) You can then use those symbols to compare to your selection and see how it stacks up.

To illustrate this (it’s not as hard or as complicated as it sounds), go to Yahoo Finance Technical Analysis for Exxon and type COP in the “compare to” space. You can then check out the charts.

This wasn’t all that tough. We looked for the industry leaders using the Profile -> Industry -> Leaders/Laggards, and found Conoco (COP) to compare to Exxon (XOM). At the time of this writing, the chart showed that Exxon is doing better than Conoco on gain in stock price.

This does not tell us that Exxon will continue to beat Conoco on price gain but does show that, historically, Exxon does stack up against one of the industry leaders. Other factors naturally fall into play when you are considering this investment. Do you need to take dividends into account? Does the stock price have a regular pattern of gains and losses, etc, etc.

Hopefully that wasn’t too complicated to follow. The point to be made here is that you can and should use the “compare” function to see how your selections fare when compared to other companies in the same sector. It can give you an idea of the relative strength of your investment. The example given was not to hold an oil company in a favorable light, but was done because the larger companies in that sector are generally household names. The method illustrated can be used whatever investment options you choose.