JimL; re: Oil vs. Gas - both have attractive factors
You, "Q" , a few others here and I are on the same page - virtually the same companies as well. Maybe where I differ here is that I have not changed my take on NG, OPEC, crude prices, or the outlook here fundamentally at all; but what I have changed my outlook on - is what those with the money are doing, can do - and will do...
What they can do - is control shareprices - period. We waffle in trading ranges - unable to break out because the energy funds will not chase here,they are ignoring the fundamentals and the bullish forward expectations. We can no longer deny that we are at historic multiple lows - directly into historic commodity price highs ?!?!? - that's insane on the surface. Institutions sit and add on the retraces - which is what I do. re: NBL - buy it at $20ish, look to sell it on any weakness/retrace off of $22ish -over & over again. XTO can't break solidly over $9 and stay there and make a move back to $10-$12, even though they did everything they said they would do and everything analysts asked of them to hit their $18 target price ?
We can not break thru resistance here without sector rotation and the return of "some" momenteum money(we aint ever getting all the Mo - from techland anytime soon). It will take OPEC's announcing the maintaining of cuts (which I think they will do) to start the next solid leg upward for the OSX - to bust thru 100 and for the E&P's to return to Sept levels - which are about 50% upside from here compared to 25%ish upside for the OSX stocks in the nearterm.
The reason I am buying some driller/service plays is that they have better momementum and better support from the market right now; you cant deny that. I think E&P's have much, much better fundamentals and that they will ultimately show greater upside appreciation in comparing apples to apples. ie: say comparing sector leaders like APA BR NBL EOG XTO to say SII CAM WFT NE ESV for example. I like XTO doubling to $16 quicker than say ESV going to $48 for example. I like APA going up 50% from $36 to $54 quicker than say SII going from $54 to $81, I like EOG going up 50% from $15 to $22 quicker and more likely than CAM going from $47 to $70. But I am buying $12 FLC here, because I certainly can see $25 FLC by year end and I can see $42 DO - a 50% move. Those other OSX names have to break into new territory - and at near historic PE multiples to get there - that's why I am buying driller laggards; the E&P's merely have to retrace to where they were in this past September - and at near historic low - to merely average multiples. But - for the short-term; or in case commodity prices retrace to say $2.25 Gas & $20 Oil; then the drillers can and will still march forward - but, the E&P's may not get the momenteum money needed to fullfill their prior performance and their fundamentally supported valuations.
The drillers are the "insurance" play on retraces here into the OPEC meeting - because they WILL march higher yet after the dust settles - as the rig utilization will not change much from $18 to $24 crude oil imho; but the valuations for E&P's certainly will...
PGO in the $13's would be equal to FLC & DO - and a good diversification for E&P players - as PGO certainly will see $20+ - it allready has this past year. $13 1/2 to $20 is 50% as well.
I think some diversification here on an individual stockpicking basis makes sesne. I want to be on the Driller Train especially when it leaves the station. I got caught without much in the driller portfolio on these prior breakouts where E&P's languished a bit - not again... I will not chase ESV, NE here - but, FLC, DO - PGO vs. say CAM; yes I will buy those names at these prices.
Jim; VPI is clearly still THE play on crude Oil; they are heavy on the Oil side, unhedged, growing production, making solid acquisitions and have lots of credit available to continue to drill, or acquire - and have lots of upside via the drillbit.
I love VPI - and will probably start adding again tomorrow, definitely in the low $12's - and heavy on any break into the $11's if seen.
My comments only meant - "whodathunkit" - as in; VPI retracing with present crude prices is purely "sentiment" driven - and I think its a screaming value here and as I think we will spike thru $30 for Oil, because OPEC "aint" easing quite yet - VPI is a buy and will see $17-$20 potentially this year and the Yemen play is the icing... I love VPI - period. I feel lucky its retracing, and I have it on my top 5-7 stock watch/buy list.
As far as crude vs. gas; tough call there - as NG is allways weather/sentiment related in the short term. I think NBL EOG XTO BR (I like NBL better) etc are phenomenal buys - maybe XTO NBL EOG in that order for my personal NG play. I love HSE as a sleeper on those retraces to $12-$14ish, this could be a $25-$30 stock in 15-18 mos with their huge $7 cfps potential - only their debt/leverage keeps their multiple down here. If we would see a 2 year+ NG boom and we should/could - HSE is one hell of a play and EOG NBL XTO - are great, must owns. APA also becomes a core play on any further weakness here - this will be the institutional mo-mo play ultimately.
Sleepers are also high debt, turnaround stories like balanced producers OEI UPR PXD - all have prior poor hedges coming off, are lowering debt and are great value plays. If we see a sustained commodity price environment here - these are core - must owns as well.
Small caps - got to play a basket; I loaded RGO a while ago, as their balance sheet and crude oil exposure make them special, I like RRC here still, very much, CRK, TMR near $3 is a great technical buy, if not fundamentally supported, MEXP will get their credit line increase with new year end reserve #'s imho - risky, but it and PGEI and a few other micro's are worth the upside risk when held in a basket.
The reason I sold a bit here is that I see continued opportunities to buy allmost everything cheaper into the weakness prior to OPEC formally announcing.
Even if the "names" breakout here - there is allways a fallen angel like BSNX, or FST, or a laggard small cap like RRC to buy; no one is going to miss anything overnight, or over 3 days here. It maskes sense to lighten into a pattern of big block sells, or technical weakness imho.
Save some powder - its going to get interesting. |
