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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (3807)	4/24/2001 11:40:22 AM
From: Original Mad Dog	Read Replies (1) \| Respond to of 33421

John, I have been giving some thought lately to the extreme cyclicality we are seeing in certain industries. Just a year or two after being told that the tech-driven information revolution had rendered the business cycle extinct, we see some industries (such as semis) drop off 30 percent or more practically overnight, others (such as PC's and routers) convert from hypergrowth to no growth or slight negative growth, and still others (energy, such as oil and refining) start to ramp up revenues and profits significantly after a long down period. The question is, how to play this out. Many of the energy stocks have already risen, reflecting well on the earlier bets made by those who saw it coming, but perhaps leaving little on the table for those arriving now to dine. The tech companies, in most cases, appear to be facing a potentially long down cycle, and it may yet be too early to bet large on a quick rebound. When you crash a car into a wall at a high rate of speed, it takes a bit longer to rebuild it. One sector that might bear watching is companies involved in energy supply infrastructure. We may be seeing gas well above $2.50 a gallon this summer, not because of crude prices but because of squeezes in refining capacity. Another refinery burst into flames in California this morning, along with a large one in the UK last week. Refining margins (see Conoco and Exxon Mobil reports from yesterday) are robust after a long period of being nonexistent. Refiners invested as little as they could over the past couple of years when margins were low; now you may see a lot of large energy projects get funded. The California crisis may add to that impetus. One company I follow that may benefit is FWC. They have suffered badly in the energy downturn because they get their revenues from construction and engineering of energy projects. They got delisted from the S&P 500 as their market cap shrank...they are now worth only $500M or so. But a rebound seems likely (up 10% today alone). I don't follow the overall sector that closely. Any other names you know of that might benefit from this trend???