(MONEY Magazine) – Will oil shares continue to glitter?

Oil is living up to its nickname of "black gold." Petroleum players have been among the market's best performers, with ConocoPhillips (COP) leading the pack. Shares of the nation's third-largest oil producer have soared 120% in the past two years. Is Conoco's run nearing an end? Not at all, says top value investor David Dreman, whose Scudder Dreman High Return Equity fund owns the stock. "People are looking at 1990s prices," says Dreman, "but the world is very different today." With no major oil discoveries and rising demand from China, prices will remain high, he says. What's more, Conoco is also a large oil refiner, and lack of capacity is pushing up prices and profits for making gasoline. Conoco's shares, at $110, trade for 10 times 2005 earnings. Oil stocks hit 16 times earnings in the late '70s. --STEPHEN GANDEL

A growing economy is usually good for bank stocks. Not recently. Three Sivy 70 financials--Citigroup (C), J.P. Morgan Chase (JPM) and Washington Mutual (WM)--have been lackluster performers since mid-2003. What gives? The Federal Reserve has been upping short-term interest rates, but most investors don't share the Fed's inflation fears and have held on to bonds, keeping long-term yields low. Banks use short-term deposits to fund multi-year loans and capture the difference as profit. Smaller spreads mean smaller profits.

That's less of a problem for Citigroup and J.P. Morgan. The nation's two largest banks generate only half of their sales from lending, compared with nearly 100% at WaMu. Citi and J.P. Morgan will continue to shift from lending to such businesses as underwriting, asset management and advising on mergers. That recently prompted Bill Miller of Legg Mason, a noted value investor, to call the banks two of the stock market's most interesting bargains. --S.G.

When short-term rates rise but long-term ones don't, it's harder to make money on lending.

SOURCE: Bloomberg.