Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: NucTrader who wrote (24866)	6/28/1998 4:04:00 PM
From: SliderOnTheBlack	Read Replies (4) of 95453

FLC...... & ''catching a falling knife''. We are at pure value levels with prices so low that it is no longer a matter of calling ''the'' bottom or catching the mythical falling knife by the tip... we are close enough that it no longer matters. The best of the oil sector stocks are now at prices that anyone other than day & short-term active traders should not pass up. FLC, CDG, EVI are among the better buys IMHO. As far as waiting for momentum or oil prices to turn before buying; the rapidity at which some of these stocks have turned indicates the realistic chance of missing a 10-25% move (profit) by waiting.... ie: the history of FLC bouncing off prior selloffs. I think a time comes when historic PE/price levels are reached that one simply can not pass up. Certainly a case of buying with say 50-60% at current levels and holding back some funds for further averaging down in case of further declines is prudent; but to pass up FLC at $22 ...? A few stocks in this sector are 10% below their prior lows on the past Jan & March selloffs. However few are deepwater oriented & have 50% eps growth going into next year based on recent downward revisions. FLC sold off to $26 7/8 in Jan & $25 9/16 or so in March - both of these lows saw runs thru $30 - we are now able to buy @ 10% below those prior lows ! I believe FLC has had 4 or 5 bounces after each selloff; Aug 15 1997 to Oct 1997 ran from $26.37 to $41 Jan 9 1998 to Jan 16 ran from $26.87 to $30.37 March 13 1998 to March 27 ran from $25.56 to $32 April 24 1998 to May 1 ran from $29.43 to $34 Based on the knowledge that we now have coming from the OPEC meeting & their announced production cuts and more importantly, their committment to further cuts if necessary; make this a much better time to buy than the prior January & March selloffs. With FLC selling 10% below these prior lows - it is my choice of ''best buy.'' I think it is a ''given'' that the recovery in the demand from Asia is at least as important as production cuts. At least 1/2 of the problem has been addressed (production cuts) and again; does anyone think that Asian demand will not increase in near term ? Even at current production and demand levels - we have room for substantial stockprice appreciation in many stocks like FLC. Falcon is selling for 9 times the lowest downward revised analyst estimate of $2.50 for 1999. As time passes, even with demand and production levels unchanged (worst case scenario) we have room for appreciation via PE expansion to historic norms in FLC's case to 14 x 1999 EPS of $2.50, which equals $35 per share or a 65% return from todays prices - given that the market will expand the PE as we near Asian demand recovery, storeage level reductions and/or rises in crude price levels... One could wait for 12-15 months with a 65% return...and still achieve perhaps 3 -5 times the return of the DOW.

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