Morgan Stanley Scaredy Cats Create Huge Opportunity For Profit

In February and March, I banged the drum on Colombian oil producer Ecopetrol S.A. ($EC).

This is a publicly traded, state-owned energy conglomerate.

Ecopetrol pumps and refines oil. It also operates pipelines that get these fuels to major cities. And, the firm uses its petroleum products for building and maintaining toll roads throughout Colombia.

On top of all this, Ecopetrol is extremely cheap — trading at a price to earnings ratio under 5 for most of January and February.

In late February, Ecopetrol announced that they would pay $1.60 per share in dividends this year. Or, about a 14% yield. A few days later, Morgan Stanley downgraded Ecopetrol stock on fears that it wasn’t preforming as well as they’d anticipated. Classic Wall Street groupthink kicked in, and all the institutional investors sold.

Ecopetrol fell about 10% after this report.

This cheap, essential company with a guaranteed dividend of $1.60 was now trading for less than $11 per share.

An opportunity too good to ignore.

I bought 120 shares for an average price of $10.70 each. Within a month, Ecopetrol rocketed up to $11.89. And, the company just paid their first dividend of the year on April 10th.