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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: JungleInvestor who wrote (61586)	3/7/2000 8:26:00 AM
From: SliderOnTheBlack	Read Replies (2) \| Respond to of 95453

Jungle Inv; re: Barrons articles etc. I Looooooooooove UPR here and it is popping up on "all" the list of late... I've seen few comments on the flurry of nice pieces on Oil in Barron's of late spoken about here on SI ? The Street "gets it" from what I hear and we saw a flurry of funds come to the OSX - as the OSX is a hedged bet to them - that being that oil service & drilling will increase going forward, regardless of crude stabilizing at $28-$30ish, or falling and stabilizing at $22ish. The Street knows there is upside here, but there is more upside in tech presently and untill the "Mania Train 2000" leaves the track, the Boom 2000 train in the Oilpatch is just an after-thought. Institutional money managers and analysts have also commented on the tech-like valuations of some mo-mo fav's like BJS SII ESV etc. These have forward PE's of 30-40+ here in many cases and ESV is now priced where it was at much, much, much higher earnings, dayrates & rig utilization. These stocks are NOT cheap, nor even value plays at "present" on 2000 & 2001 estimates ! They are now MOMENTEUM plays ! - that's not to say that they will not go higher, but the downside retracement risk, if OPEC does something stupid like raise production 3 M BOE, or even just raise production 1.5 M BOE - then wavers on compliance and gets the "SEE ! - we knew OPEC would cheat" - spindoctors moving... THEN; there is some downside to the momenteum names in the OSX. The Value is in the laggards - the 2nd tier companies that we've seen move of late, some as much as 20% in a single day and in E&P's , mini-majors, Integrateds and the Super-Majors themselves. THIS is where the risk vs. reward plays are and the the ability to leverage names like TX CHV UCL COC P MRO KMG will be "THE" plays of this coming post-OPEC meeting leg of the Oilpatch's BOOM 2000. The analyst upgrades of late have been in the E&P's, the upside earnings revisions have been in the E&P's and now Barrons et al - are focusing on the dichotomy between record oil & gas prices, Barron's also touched on a "reality" that few are focusing on here. Greenspan could trigger a recession very easily by taking rates too high here and he knows it. The best friend that Greenspan actually has here is OIL ! Oil has the singles greatest "sentiment" impact of any commodity on American consumers. Greenspan can and "will" let Crude Oil run here - as it will be a "Brake" on consumer spending - slowing auto sales and general consumer spending. Crude Prices are also the #2 impact upon the Market, behind Interest Rates. Greenspan gets another friendly weapon with $30+ Crude Oil. The speculation is that OPEC remembers that it was Mr. GEORGE BUSH - that saved their ass in the Gulf War and now his son "GW" is running for president and is certainly "Oil friendly" to say the least... OPEC can put "GW" in office - by merely rocking the American Economy just a "bit" by maintaining $30+ crude and $2 gasoline. Many speculate that Gore can not be elected if Americans are paying $2+ for gasoline come next November and that OPEC will keep the spiggots tight as a "payback" to the Bush family. Regardless of "any" connection between OPEC & Bush; Greenspan's best friend here is high Oil prices - it does his dirty work for him and it also is the looming shadow to reel in irrational exuberance. The divergence between record Oil & Gas prices and historically low valuation multiples for the E&P & Oil Major side WILL be reconciled. When major momenteum money comes to the Oilpatch - it can NOT find enough liquidity in the OSX names - the vast majority allways has and allways will flow to the "Major's, Intergrateds and Super Independants. Time to look at the TX CHV UCL P COC MRO with their incredibles earnings upside and historically low valuation multiples. The more mid-capish names like BR KMG OXY UPR PXD XTO NBL EOG etc. have tremendous fundamentals and earnings visibility here going forward. While on "ANY" fundamental, or historic valuation multiple basis - the OSX is surely "fairly" if not even slightly over valued here - especially on a historic multiple basis; we have the EXACT OPPOSITE in the majors, integrateds and E&P's. Leveraging "that" anomaly is THE play going forward. Go back and look at the 97, 98, 99 rally moves. These above names ran right with the OSX every time; except this move of late. What is incredible; is that this time; their fundamental's are better to a degree that exceeded any other fundamental comparison of any of those prior cycle's. Has the time come to switch from SLB BJS CAM SII ESV and to buy P CHV TX UCL KMG BR ? I think so and for anyone who cares to factor in "risk" - it's looking like a no-brainer imho... I'm not selling my remaining OSX plays, I wil hold them, but I am NOT looking to add any more "new" money in that area, but rather the mini-majors, integreateds, E&P's and maybe actually margining a major or two... PS - NSOL up over $100 bucks in pre-opening institnet action - ie: The Mania is in the 2 minute warnings stage imho... CNBC talked about the momenteum traders moving to the "pink sheets" and running tech names from .75 cents - yes ! "cents" to over $150 - in mere weeks... The Palm fiasco -idiocy and the "no-brainer short play" that followed is a sign of the growing confidence of hedge fund players who will start being very, very aggressive on these type of moves in tech going forward. It's going to get real interesting imho... There could be a great series of sector trades aligning imho: 1. Long Oil's 2. Short Tech & iNet - especially 2nd & 3rd tier pure mania players 3. Long Financials - with the timing potential to jump with some nice profits right off the peak of the first initial Major Sector Rotation move to Oils post the OPEC meeting - perhaps the end of Q2 4. After a potential DOW & Total Market correction led by Greenspan's continued rate hikes AND high $20s crude & $2 gasoline - the value plays in Steel and "old economy" stocks may start looking bottomed in late 2000. If you can't make money and lots of it going forward in this environment - quit and go home.