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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: Sharp_End_Of_Drill who wrote (16228)12/28/2002 11:38:59 AM
From: Ed Ajootian  Read Replies (1) of 206326
 
Sharp, I've started looking around at OSX companies to put in my portfolio for the contest, and I must say I don't understand the valuations on them.

For cyclical industries I always thought the peak earnings get a pretty low multiple. Yet in the few that I've looked at so far they are trading at very healthy multiples of what they earned in calendar '01 (which is what I consider a peak earnings year for a drilling company).

One company in particular, Patterson-UTI Energy (PTEN), the one that Que likes to short, seems way overvalued. They're trading at something like 35 x '03 earnings and around 15 x '01 earnings, yet they are only gonna break even for '02 and thus folks are obviously anticipating a big ramp up in drilling for '03 for them to get to their earnings number. I'm considering shorting some of that or buying puts on it as a hedge against my E&P portfolio. The only way I would lose on shorting PTEN at this point would be that from here on we have a cold winter or oil prices go idiotic due to Venz/Iraq problems, in which case my E&P stocks will go totally idiotic. Whereas if we have a warm winter from here and the politics somehow work themselves out, PTEN takes a serious slide --- more than my E&P's will, IMO.

Notwithstanding my bias toward E&P companies I would nevertheless like to use this contest as a reason to at least become more cognizant of the OSX companies. Would be interested in hearing about ones that folks like a lot at this point. Particularly interested in ones where there is some "angle" to the story, which is causing the market to temporarily undervalue the stock.
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