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3 Stocks to Avoid in Energy Despite the Oil Price Rally

PBR Total Long Term Debt (Quarterly) Chart

Energy is back, baby!

OK, maybe that's a little too optimistic, but the oil and gas market is in much better shape at the beginning of this year compared to entering 2016. Oil is hovering around $55 a barrel, and OPEC's decision to finally work to maintain prices instead of market share has given the market confidence that we aren't headed for a steep drop any time soon.

Just because the market for oil and gas stocks is looking better doesn't mean investors should look at every oil stock out there. There are some real duds out there are to be avoided. We asked three of our energy contributors to highlight a stock they think is not worth an investor's research time. They responded with Cobalt International Energy (NYSE: CIE) , Calumet Specialty Product Partners (NASDAQ: CLMT) , and Petrobras (NYSE: PBR) . Here's a quick look at why these three names aren't worth pursuing.

PBR Total Long Term Debt (Quarterly) Chart

PBR Total Long Term Debt (Quarterly) data by YCharts .

Capital expenditures fell below operating cash flow for the first time since 2012, but that also means the company isn't investing in developing resources for future growth.

With all of this said, Petrobras could recover if oil rises far enough. But the upside doesn't seem to be worth the risk. Net income was just $10.8 billion in 2013, when oil was around $100 per barrel, so oil has a long way to go before investors will see value from investing in a company with $122 billion in debt and a $64 billion market cap. The overhang of debt and corruption are too big, even if oil prices continue to rally, and they will keep me far away from this stock.

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Matt DiLallo has no position in any stocks mentioned. Travis Hoium has no position in any stocks mentioned. Tyler Crowe has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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