Jon - small cap E&P's are still lagging
I wouldn't be a strong profit taker on those - especially EEX - which is at the very least a must own in any small cap E&P bakset - and a "Basket approach" is the smart way to play the small caps.
I would be a profit taker on the APA APC/UPR EOG larger caps who simply don't have the upside leverage that the small-mid caps have.
Per all the analyst reports out there - and as jim p showed from Merrill - those mid caps who are unhedged and selling a 3-4 x cfps multiples - I wouldn't necessarially be selling, or taking heavy profits (allthough personally I have taken profits because I made more money playing tech both long & short)... but, I would pause a bit here into this market turmoil - to perhaps get to add to them on a pullback here, vs. chasing them of late... I'm a net buyer of Nat Gas pureplays - will continue to be so as long as the fundamentals remain so strong; but, I am willing to take profits on any breakouts here and am staying disciplined to wait for a pause that refreshes, or a sympathy selloff into this market danger here before I do any margin buying, or even tap out my cash - I've taken profits here to just a 25% net position - and I still make money on any moves up in that 25%...
Patience & discipline are the mantra here - has their EVER been a period in the Oilpatch, or the overall market to where it may pay off any better ?
PIGS GET FAT - HOGS GET SLAUGHTERED !
... if you don't belive that - merely rember the trader formerly known as Lingerfelt - who got margin called & sold out by his broker into an Oilpatch Bull Market - not from making bad stock picks - quite the contrary; but merely from failing to take profits and un-leverage into a strong rally that turned into a momentary top that pulled back strong - where he saw the double edge side of margin use.
No one EVER went broke taking profits - but; some have by rolling the dice one more time too many...
EEX is an obvious fundamental value - very cheap and if/when they finally hit one offshore - to the moon alice... I really like EEX's potential - perhaps more upside than virtually anything else similar.
RRC - I've only got a "Basket" position in my non-trading Long Term account - RRC certainly has substantial upside to its prior $5-$7 range where it traded - but, this has certainly been the enigma stock.So much behind the scene's action given the First Reserve situation etc - I'd play it in a basket vs. a major trading position.
These micro - caps if unhedged and / or if they do hedge strongly forward into $3.50+ Nat Gas (hopefully at least 50% of production imho) will be the ones who most dramatically will be able to reduce debt & repair their balance sheets, raise some cash and have lots of upside still remaining...
I like small/micro E&P's here - have nibbled, not trading them - just throwing bits & pieces on weakness, or positive events into my LT non-trading acct - still hold EEX MLRC MHR RRC MEXP TMR RGO BEXP CRK EVER among others from the dark days when they were priced to go out of business...
Post the June Fed Meeting if the market stabilizes, or on any pullback the NG mid-cap plays like BSNX THX XTO HSE still have lots of upside; NEV is a proxy on crude prices - poorly hedged for a period going forward - but, lots of drillbit upside and in what looks to be a multi-year period of $22+ crude oil - NEV is one of the potential pocket rocket plays - was what; a $50+ stock at peak in 1996 and 1997 ? Very cheap on what's in the ground...look at the spike it made this past Feb from $16 to near $25 overnight.
PS - Bullsky - take a look at SWC/Stillwater Mining - interesting play - PM me if you like, or post your comments here - as I'm just beginning to look at it - anyone else follow it ?
We'll I am closing out some tech shorts here - taking some of the profits and adding more metals...
Actually; not even going to nibble on tech here long yet; but may begin to buy some Dec-Jan 01 calls here on the fav's. Huge potential upside, doesn't take much cash - can still use that to go longer the Oilpatch on any sympathy pullback, or add long common shares later on an established bottom. I also limit my downside.
I don't know why so many of my fellow "younger" Traders who may never have actually experienced a bear market; simply refuse to listen to experienced traders/market legends, or to heed history... I guess the next generation is about to be taught humility... hopefully they will pass it on to the next generation when that time comes as well (VBG)... I'll do my part !
Lesson #1 is a rising rate environment - greatly reduces the value of both present and future earnings - ie: valuation multiples greatly contract.
I don't know why the NAZ can't go back to early 1999 levels fundamentally - and even then; the real Bear case (which I dont quite yet buy) can be pushed further by discounting those values - in light of compressed multiples that should be used given a potential yet to be continued rising rate environment... maybe we can see $35 Cisco ? Who knows... But, just beginning to buy - far out calls seems to be the smart play imo. |
