I've been a lurker for several months now. Thanks to all for helping to keep me well informed of this sector and also for helping to keep my sanity. My holdings in this sector (CFK ESV NBR RDC VRC) off on avg. 34%. Am still long, very long.
A few comments if I may.
1) In reference to this sectors continuous downtrend
Back in Nov. several post mentioned this sector having large institutional holdings and Fidelity ContraFund starting to sell. It was mentioned that it would take 2-3 months for the fund to unwind its position. If that is the case, the blood letting may still not be over. Remember, they bought these stocks possibly 3-5 years ago, or longer, when nobody would touch them. If prices fall another 10-20%, they're still making huge profits on the run up over the last 2-3 years. Not only that, if the fund manager made his announcement to the rest of Fidelity managers, they all go out and sell boat loads of calls and buy twice as many puts. They locked in their profit, and make more by driving prices lower. These guys are killing it. When they move, they ARE the market, the rest of us are just along for the ride - up or down. Once the ContraFund moves out, they stay out for a long time, until the stocks are out of favor with everyone. They won't be back anytime soon with everyone pounding the table on this sector - it's not their strategy. In other words, who's big enough to counter this kind of downward pressure, how long will it take for the market to absorb this volume being unloaded, and who's going to drive it back up? Contra had 16% of $31 bil. in energy as of 10/31.
2) Overall market
As Pete has mentioned and William J. O'Neal, publisher of IBD, recommends, do not fight the market. If it's trending down, its going to be hard for anyone to move ahead significantly, unless your playing shorts and puts. This market is still way over bought.
3) The future for this sector
The fundamentals have not changed. This may very well be the best sector earnings wise in 98. This thread, myself included, may love these stocks, yet if we are entering into a bear market, which I think we are, the best sector may do well just to stay even, and could still go down. Japan Nikkei went from 40,000 to 16,000 several years back. Their best sectors still got clobbered, and haven't recovered yet. I'm not predicting it to get anything close to that here, but it can happen. This sector may do well just to hold its own next year. If fundamentals were driving this sector, none of us would seeing all this blood.
That's my two cents worth. The above is not intended to blast this sector, but to offer an additional perspective and a bit of levity to the ongoing mostly bullish dialogue. Any comments would be welcomed.
I do appreciate everyone's most informative comments and the humor to keep us all sane. A Very Merry Christmas To Everyone!!!
Scott |
