Just a little Cramer (from a Yahoo chat) bearishness to spice up your Saturday :-)
*********************************
Question: Are oil service stocks a contrarian's delight or a spear catcher's downfall?
TSCNYjjc: I still don't like that group. I am doing work for a piece this weekend about the group, noting that RDC (Rowan) is now down 50% from the high, but that I am still scared of it. I covered a lot of oil service shorts today. But I WILL NOT GO LONG. The numbers (estimates) are simply too high. They will come down and so will the stocks.
Dave
I'll paste the RDC story after its published.
{EDIT} I guess the story's already out, here it is.
********************
Wrong! Rear Echelon Revelations: Profiting from Safety
By James J. Cramer
6/12/98 12:15 AM ET
Eight months ago Rowan Cos. (RDC:NYSE) peaked at $43. What a fabulous chart that was! Looked like it could go on forever. Now the stock has been cut exactly in half. A 50% decline. And now everybody is emailing me again, and chatting me up about how these stocks can't go lower. That this is the bottom. Has to be.
As a bow to the power of positive thinking, I am going to cover my Rowan short today. Enough is enough. This stock is due for a bounce, if only because of the steepness of the decline. I see a potential base camp forming on the right side, and from the looks of things, that would be Base Camp Two. Why Two? Because, if Rowan's chart were Everest -- and it sure looks like that -- we clearly aren't at Base Camp Four, which would put us too near the summit. Even Three looks well above here. But we are nowhere near the bottom either. That's why Base Camp Two seems just about right.
How come I don't want to buy this "dip"? Put simply, I don't mind buying stocks that are low, provided they are going from bad to good. In other words, let's say that Rowan had been out of favor for a long time and that earnings had been repeatedly cut. If I thought that earnings estimates had hit bottom and might be about to stabilize, then I would be sorely tempted to buy Rowan. If I thought that earnings estimates had actually been cut too low and would begin to go higher, I would be all over this like a cheap suit.
Is that really the case with Rowan, though? I think not. I think estimates are still way, way too high, especially given the virtual collapse in crude these last few days. There are still way too many bulls on the stock and on the group. Some of the analysts in the group are still in TOTAL DENIAL even though their own exploration and production analysts have given up on the whole oil complex. The whole psychology is wrong for a bottom. You don't have enough people giving up and you don't have rock bottom estimates. You never get a bottom from price action alone. Never!!!
I have written before that I thought this group hadn't bottomed. And no sooner had I written it than I got email from hundreds of wiseguys saying, "Cramer's wrong. Cramer doesn't know anything. Time to bet against Cramer." It's one of the reasons, if not the main reason, that I got rid of my click-through byline.
I don't need that kind of grief. I call 'em as I see 'em. I have a way that I have developed to spot bottoms and it has rarely let me down. I don't want to be influenced by yahoos talking their positions, hoping against hope that I will bull these stocks -- which I don't do anyway. I wait until the estimates are done being cut and the sellers are through selling. Then I move, anticipating that the situation is not as bad as it was.
Without that context, I am just catching a falling knife. That hurts my hands too much. Occasionally, I have been fortunate enough to catch a falling knife by the handle. But most of the time it feels like what happens when you cut a bagel with the knife facing the palm of your hand. Ouch!
My way is safer, better and more prudent. But less daring and exciting. I don't like daring and exciting. I like profits, short- or long-term. There are none to be had in this group.
|
