Looking at the flipside of any industry downturn is a good way to identify buying opportunities. Case in point – oil.
Since June, Brent crude, a benchmark for world oil prices, has collapsed more than 50% from US$112 a barrel to just under US$51.
We're so used to oil and petrol at the pump being expensive that when prices fall suddenly, investors assume something is wrong or potentially threatening.
Foolish investors, though, should immediately ask themselves, "Who stands to benefit from this?"
Below are four industries that could get a boost in revenue, earnings or both if oil continues down and stays down.
Transport
Fuel is a big input cost for transportation companies, so any price relief is welcome and adds to the bottom line. For road transport, look for Toll Holdings Limited (ASX: TOL), which is a major shipper of food and retail goods to stores. Also, there are the big rail freight companies like Aurizon Holdings Ltd (ASX: AZJ) and Asciano Ltd (ASX: AIO) that carry coal, grain and freight containers from one end of the country to the other. That said, none of the three stocks have seen any great increase in share price since oil's nosedive, so the effect may need time to work its way through the industry.
Retail
Retailers benefit indirectly when their customers have more money to spend after paying less for petrol. Like an interest rate cut, more disposable income gets shoppers back into the stores. Supermarket giants Woolworths Limited (ASX: WOW) and Wesfarmers Limited (ASX: WES) may be the first of stores that get a boost as food shopping reacts the quickest.
After that, I'd follow the retailers which are the best of the bunch already. One is JB Hi-Fi Limited (ASX: JBH). The electronics retailer saw a healthy net profit increase in the financial year 2014 when many other retailers went soft.
Air Travel
Similar to goods transportation, airline companies use incredible amounts of fuel. Qantas Airways Limited (ASX: QAN) was already rising in share price due to the start of its three-year transformation program to cut out about $2 billion in costs. When oil fell heavily, the airline company's stock took off more like a rocket than airplane. Since mid-October, the share price went from $1.28 to $2.56 currently- up 100%! Over the next 1 – 3 years, Qantas could see further gains as the cost cutting program rolls out, so watch this space.
Paint and sealant companies
Some manufacturers can see benefits if their raw materials for production become cheaper. One example would be paint producer DuluxGroup Limited (ASX: DLX). Already helped by the rising housing market for its paints, sealants, and home gardening products, its store prices will pretty much stay the same even if raw material costs go down. The company keeps the difference for a healthier profit. DuluxGroup is forecasting solid earnings growth over the next two years.
