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

To: Think4Yourself who wrote (64540)	4/14/2000 9:10:00 AM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 95453

"Q" - Drillers allways trade at higher multiples than E&P's... For anyone who wants to see what stocks get the "mo-mo" in times of sector rotation from the general market - go see how APA APC BR UPR moved in those 1997 & 1998 Rallies vs. say RIG DO FLC VRC GLBL VTS etc - NO COMPARISON ! "Q" - by the way PGO trading at 3.5 x 2001 est cfps & 4 x 1999 cfps; but service & drillers are valued on different valuation multiples than "CFPS" (surely you realize this ? (VBG)- stocks like PDE & FLC are ridiculously cheap on replacement value/NAV multiples. What I would do is look at the historic multiples applied to these stocks in prior cycles and compare existing prices to analyst price targets - stocks like FLC PDE RIG PGO are near doubles to analyst price targets. Not all E&P's are fully/fairly valued - I am concentrating on those "values" and the integrated - mini major subsector as I believe they are undervalued relative to the mid-cap pure E&P names - allthough I hold a ton of BSNX & PXD here as my two plays on Oil & Gas E&P's. Again; I gladly have traded OEI UPR NBL EOG BR XTO for FLC RIG GLM PGO HAL & small cap laggards like FGH UFAB HOFF MDR KEG VRC here of late. Drillers by the way "Q" - are presently trading about 5.5 times "peak earnings" versus 10 times "peak earnings" in the 1997 rally and .81 x replacement value versus 1.6 x replacement value in 1997; the drillers have virtual "double upside to peak cycle" across the board - with laggards like FLC being potential triples here...additionally this valuation appreciation upside is very importantly endorsed by the price targets set by the analysts. At this part of a multi-year Oilpatch expansion cycle; those price targets should get blown through if we do indeed see a multi-year boom. "Q" - my main point is that $3 gas is near a historic peak; I don't want to bet on "commodity prices" - if I did - I would "mainline" that bet & play commodity futures where the upside is a multiple of what individual stock appreciation is. If you did NOT learn the lesson of how E&P's react to commodity prices last Aug-Sept in E&Pland when NG merely fell from $3 to $2.65 - $2.40; then you may get another chance here shortly (VBG)... Again; "RISK" must ALLWAYS be a factor - one can not allways make the "bet" on who has the most potential upside - as risk; is an equal part of that equation. Imho; it is now nearly again a "no-brainer" overweighting rotation play - but, this time, the market has done a flip-flop reversal back to driller/service co's instead of the E&P's as they were the play here 2-3 qtrs ago. Sell the strength (E&P's) - rotate & buy the weakness (service/drillers) - it's been working like a fine Swiss Watch here in the patch... and don't ignore "risk" - as FLC's utilization and hence dayrates & earnings will increase rapidly here going forward - REGARDLESS of $3, or $2.25 Nat Gas, or $28, or $22 Oil.... bank on it. Small Caps & 2nd tier companies were actually the appreciation upside winners from this point in prior cycles - don't miss the UFAB GIFI FGH VRC HOFF WG type of plays imho. Again; go back and do layover charts of sector leaders like BR NBL EOG vs. VTS RIG VRC for example and see how the service/driller sector outperformed the E&P's during "heady rotation" momenteum; there is no comparison... this is an excepted fact of the Oilpatch. I allways acknowledged it - the entire E&P play was that the valuation divergence gap just got so ridiculous that it had to close - and it just did; which quite fortunately presented yet another opportunity to take profits and rotate as the driller - service fav's just pulled back to where "they" are now the value. As far as "the drillers day will come - but it is definitely not here yet" ??? - I have to respectfully disagree; they are right at the exact crux of turning utilization to the point where dayrates just spike - literally ramping earnings to a degree similar to NG, or Oil prices doubling for E&P's... The drillers move so fast that they are the last sector you want to try to catch - the train has slowed down just slow enough to board here; dont miss the Driller Bullet Train - it's the "one" to be on. GLM just beat analyst estimates by the way... ... we shall see.