Art B - re: the LT buy & hold approach in the Oilpatch
Art thanks for sharing the mindset from the Street. We're not trying to gang up on you here & rest easy... those with disident opinions here - do get treated with respect & courtesy...when their opine is delivered with as much...
You've not shown "any" chihuahua-esque behavior yet (VBG).
But; one point... RIG PTEN SII BJS EOG & APA "aint" Warren Buffet's Coke, Gillette, or Dairy Queen .
Warren Buffet did enter the Energy play on the utility side... but I don't think you'll find his footprint in OSX stocks, or the Nat Gas E&P's, or even much in the integrated, or Oil majors for that matter.
- an invalid comparison imo; as good management can't do much about $10 Oil, or $1.65 gas, collapsing dayrates, no Cap Ex spending/orders - and lots of Oilpatch Co's with Fantastic managment - crumbled & collapsed along with the rest of the industry on this sectors volatility...
Considering the exposure this industry has to the whims of OPEC a price cartel than I'm sure Mr B would have rather strong opine's on... along with weather & commodity price volatility; these are things I envision Warren Buffet not having much portfolio exposure too.
But, as a point of clarification and out of curiosity - are you LT "buying & holding" primarially OSX,or the independant E&P's stocks on your longterm growth trend thesis ?
If so; I simply don't understand ?
These are violently volatile cyclicals - with a track record of the OSX index moving as much as 50% in 4-5 weeks in both directions.
This isn't the DOW, or the Utility index.
This is the home of fast & hot money... a relatively small niche sector that has become among the most momenteum oriented of all momenteum oriented cyclical sectors.
Given that volatility track record & the degree of hot money/momenteum players that have been attracted to this sector - especially in the last two Oilpatch cycles... AND perhaps, most importantly - given the rise of the momenteum style of Institutional Investing in the last few years ... AND the rise of the online/livetime/active-trading individual investor; in all due respect - I can not honestly think of a single sector in which a longterm trend/buy & hold approach is more "ill-suited" ?
Now; if OSX stocks are less than 20% of your total Energy component and you do actively "fade in & out" of your OSX positions and you are primarially weighted (60-80%) to potential LT "growth" stories & niche plays like the construction plays for the Nat Gas infrastructure buildout like SGR, or FLR; or the power/utility plays like ORN NRG DYN CPN; a new paradigm energy trading play like ENE; or a stock like XOM which rode out the last cycle collapse much, much better than the OSX stocks - then & only then; could I begin to comprehend a traditional longterm buy & hold approach to Institutional energy investing.
Longterm buying & holding and cyclical investing are incompatible strategies in general imo.
These are NOT growth stocks - they are CYCLICALS.
You buy & hold growth stocks - you TRADE cyclicals.
Very few cyclical trends last the 5-10-15 year duration of buy & hold investing - especially energy. I don't know how any Institutional investor could buy & hold RIG BJS SII ESV NBR et al - over the last few years and answered to his customers for rolling over twice in a 3-4 year period from $60 RIG, $40 ESV $30 PTEN etc to $25 RIG, $10 ESV,or $5 PTEN from those lofty heights... and if you didn't enter at "THE" bottom - you've really got some "splaining" to do...
How could you NOT take profits on either the early cycle, or late cycle "double tops" that the OSX index has now historically put in in each of the last two Oilpatch cycles - as we see what is imho; the 2 schools of cyclical investing enter & exit on two different sets of fundamentals (that's another discussion) "and" - how could you NOT trim into the abyss of the cyclical rollovers of each of the last two cycles ... ie: how can you explain holding the $60 to $24, or $30 to $5 type of rollovers ?
XOM as a 2% portfolio weighted position and maybe fading energy from 5 to 10% total portfolio weighting ? - yes, I would understand that as core LT buy & hold position in a broad based Institutional Portfolio, or a basket of DYN NRG ORN CPN etc, or a construction play on the NG infrastructure with SGR, or FLR... but even these stocks have not escaped the high volatility of late ?
I simply do not understand how anyone can have a "longterm", let alone a "buy & hold" strategy in one of the most volatile of all cyclical sectors ?
The technicals have never worked here in the patch on a broad based basis - simply too much volatility - the stocks get over bought & stay over bought on the upcycle & get over sold and continue to get even more oversold - on cycle rollover.
Everything from candlesticks, to PnF, stoch's, bollinger bands, Williams %R, RSI, MACD,Chalkin Money Flow, OBV - whatever technical approach, or individual indicator you name; either momenteum oriented triggers, or oversold/overbought indicators - they all called innumerable bottoms & failed to call significant intermin tops - as when the OSX ramps - it remains "over-bought" thru all the technical sell/overbought signals & when it tanks - it remains "over-sold" & cuts right on thru every buy/oversold signal.
This volatility requires more "feel", or more "art" than science and in my personal opinion; the technicals only give us LT, or ST historic support, resistance price points in which to massage our "art & feel" approach. It supply's the frame for us to paint - "within" - nothing more, nothing less.
In highly volatile, momenteum money oriented cyclicals - you must buy bottoms when the sector is out of favor, out of the news, totally unwanted & if you don't get chastised for buying them & called insane - you're too late (VBG) and if you don't sell/take profits and walk away & stay away - into near euphoria, near perfect AND still ramping fundamentals, when the sector is getting all the lead media story support and if you don't get chastised & called insane when you sell & walk away - you also sold too late ~
It really doesn't get more complex than that.
This is a contrarian's - contrarian sector.
Actually in both oversold & overbought territory; trading the traders - ie: staying outfront & reacting early to traditional "early indicators" like initial supply build trend reversals this spring , or LT economic trend change - is what is necessary to survive.
If you waited for the OSX technicals to trigger sell signals here - it was too late. If you waited for Nat Gas, or Oil prices to collapse, or for individual co's, or subsectors to post negative Year over Year, or negative sequential earnings, or if you waited for the analysts to lower 2002 numbers... you lost.
If you sold & took profits on the initial supply trend reversal & knew that the slowing global economy would on a "when, not if" basis eventually bring reality to bear... then you got out near the top.
You've got to keep your eye continaully focused on the far off horizon in this sector imho; otherwise you get blinded by the glow of the nearterm fundamentals & sentiment.
This winter when these Internet Oilpatch Threads reached near euphoric - "10 Foot Tall & Bulletproof" levels - with endless tirades of new paradigms , with the talk of multi-year, if not decade long extended cycles & with the words ENERGY CRISIS permeating the sector & media headlines - some of us on this thread called a top in the Nat Gas story; based on the "sizzle" of the Nat Gas story - not possibly getting any better than it was at the end of Dec... we sold & started to short headlong into historically strong fundamentals and perfectly strong technicals (whodathunkit ?) - with nary a sell signal emitted by "any" technician back then, let alone any of the "10 Ft Tall & Bulletproof Chihuahua" crowd here online... and we were right & they were wrong.
We said the cure for $10 Nat Gas was $10 Nat Gas... just as the cure for $10 Oil, was $10 Oil.
We said we'd see $3, if not the $2's sooner, rather than later & they were talking insane LT pricedecks of double digit gas and the lights were soon going out all across America...
Here this spring on the OSX's 3rd failure to break to new highs & with all the insider selling, with the ominous now traditional double top formed all across the sector... all anyone needed to acknowledge is that we did have a global economic slowdown and if your trigger-finger wasn't continually twitching on that exit/sell button off of that initial supply trend reversal this spring & if you didn't stick to the "Pigs get Fat, but Hogs get Slaughtered" - cyclical survivors Mantra... fah-geht about it... it was once again ... too late.
The "June Swoon" came once again to rain on the "10 Foot Tall & Bulletproof Chihuahua & Clown Parade".
Well, as Lee Raymond the CEO of XOM says:
"30 days is a longtime in the Oilpatch"
And if you look at Oilpatch shareprice movement from June to July of 2001 here of late, or June-July of 1998... indeed he's right (VBG) !
- those were some hellaciously l-o-n-g painfull "30-day" timeframes for the buy & hold mindset in the oilpatch.
Stay just a couple of days to late...chase just one bottom too many... stare into one last headlight & BAMM ! - you become chihuahua roadkill in the oilpatch.
Buy & hold an XOM ? maybe; find the next emerging/early growth stage ENE ? sure... the rest ? ... rather obvious MeThinks~
This is, was & will allways be... first & foremost a highly volatile cyclical sector ~
... and the one thing I am most sure of; is that "buying & holding" is NOT what works here and you'd better be playing with lots of feel & art vs. relying on the science/technicals and the fundamentals come late cycle... or you'll never make it out that very, very, very narrow exit door - once the herd reverses course... and once again - the vast majority of Oilpatch Bulls didn't make it out that door ~
whodathunkit ?
PS: ... the "dollar being too strong" being addressed by Jack P on the "futures" piece on CNBC this am... tic - toc' for KING DOLLAR....
The jump from Black Gold's cyclical top to Yellow Gold's cyclical bottom - will be one of the great trades here in this market... bank on it.
Hell; it allready was... as the HUI moved up +99% during the collapse from OSX 135 to 85.... lot's of profitable volatility for traders who were on the "right" side of this macro shift in these two cyclical cycle's ~ |
