Buying opportunities ?
First of all; I am not claiming to be an expert, the greatest oilpatch trader etc. I have lost a lot of money here - a whole lot - BIG DOLLAR$ ! Not fun - wouldn't wish it upon my worst enemy - BUT; I have recouped most of it in the last 4-6 weeks in what I humorously refer to as ''Guerilla Trading Tatics in the Oil Patch.''
Perhaps a little background here is germaine; I have usually only traded individual stocks in sectors of my experience - Bank/Financials and have done so very profitably; but usually I buy mutual funds or just buy & hold in other sectors. However; in April & May, I began to take substantial profits off of the table as I thought the overall market was extremely over valued. The frothy speculation in the Internet stocks, especially new IPO's and finally the KTEL & ZAPATA's of the world; signaled to me than it was time to return to classic, historically proven Ben Graham-Warren Buffet-Michael Price value buying. I saw the oilpatch as a tremendous short-term value, but even more importantly; I saw a sector who had made significant technological advances with Seismic use, techniques like those used by Core Labs , the venture into ultra-deep water and also massive consolidation to where we now had Billion Dollar cash machines like RIG, DO, GLM and where companies like SLB & HAL were must have's - in any diversified portfolio. I saw the emergence of a new Industrialized world that the worlds financial institutions were addressing all ready in strategic planning - just waiting to embrace the industrial & technological revolutions in China, Asia, Africa, South/Central America and especially Europe with Russia & the former eastern bloc players; with the EU looming so close. Oil would be the lifeblood of this growth - allways had been - allways will be. I saw a ''blip'' on the historic chart of crude oil prices along with a corresponding selloff of the oilpatch. In March-April & May; I started buying here... A good point for the market timers and Mo-Mo players here - a classic selloff bottom was established by the January and then March selloffs followed by a very substantial run up in April/May. Any momenteum player or market timer - jumped on - trust me they did. But, the classic trap happened again; we sold off big time in June and I averaged down into what were very strong - utterly cheap valuations here in the patch as opposed to the overall market. But, we continued to sell off and I averaged down again & again. But, we sold off again & again - I did call a bottom or two - as we were at ridiculous values and a steep discount to a frothy overall market. But, the market didn't react - so I finally sold - in & out a few times and started actively trading. Actually I was allmost 100% cash a few times - even for a 10 day period where I traded very little - just waiting to read this mess a little clearer... My point and the lesson to be learned here is not that one gets just ''one chance'' to call a bottom, but that one can learn from his mistakes, step back, reload and re-enter on the ''markets terms'' - ( this being a key concept ) and could do so very profitably.
I thought that if the patch continued to post these incredible positive earnings that things would turn - that the patch would decouple from oil prices - at least to an extent... It didn't (not that it won't ultimately...) so I decided to play this sector on the markets terms. We had a couple of big selloffs followed by huge institutional buying - remember the day that CNBC practically ran a non-stop PSA for the Oil Patch - they couldn't stop touting Oils - every damn analyst in the world came out of the wood work - yelling Buy Oil ! But, once again they ran & sold off on the first blip on Oil... So we now had the market tip its hand to us - they wanted ohhh so badly to buy the oil patch - but they were as skittish as a whore in church - at the first sign of weakness - they were outta here. They knew that they could miss a 30-40% pop in a matter of days here as evidenced by MDCO/MRL's incredible 40% ? - 2 day run up; the potential here was like a coiled spring, just waiting to burst out. The big money jumped in on any glimmer of hope and just as quickly jumped out on any wavering... The desire was clearly displayed, but not the committment.
What we saw next was the disproportionate 1 day sell offs in individual stocks as individual funds were doing traditional month end selloffs and also just dumping due to redemptions in some cases. We had some dramatic bounces - presenting very profitable 1-2 day trading opportunities in stocks like OMNI, DRQ, BDI, etc. I was able to make numerous profitable daytrades and quick hit & run trades off of these bounces - we were getting buyers moving in on sellofs of quality companies; we were getting the bounce. Today we had CXIPY & IO do the same thing - time will tell if these will be profitable short term trades, I do not mind holding these longterm as they are technology leaders in the Oil sector and extremely profitable companies earning substantial money in the face of this downturn; CXIPY especially so. SCSWF is also in this class - a literal no brainer - analysts upped their earnings estimates, they made a great asset buy in DIVE and have a huge backlog of deep water/International contracts.
We have also seen substantial institutional buying here, we've had 3-4 days of 2-3-4 million share days in the major OSX stocks with accompanying $2-3 gains. We were not getting this in June & July. We are getting stocks like BHI holding well in a day of others selling off, we are getting strong support in the land drillers - a very key indicator here, check the call vs. put interest in PTEN, check the support of UTI - which is substantially off its 52 week low and well supported now. BDI buys more & more Rigs and gets touted as a top ''market'' buy here recently. There are numerous signs of "the'' bottom here - not my indicators, but most importantly the ones the Bears on the oilpatch called for - a double bottom on low volume which we've had. A stabilization of Oil prices - which we've had. - On that note, we are not going to see $18 over night without major political issues but we are not going to see Noesis's $8 oil either. All neutral parties are calling for $15-16 stable oil going into a required Asian demand increase projected about Q3 1999 - then $18 oil is probable. But, don't forget the Saudi Oil ministers threat/pledge to catch the market manipulators (his term) crude oil traders in a short squeeze by massive unannounced production cuts... could this be the reason of the down-playing of this upcoming ''un official'' meeting with Venezeula - now supposedly cancelled ? - could this really be the ''buy in'' on surprise unanounced further cuts ? - he said he would do it & they have to do it - the Middle East will be at war with 3 more quarters of $12-13 oil imho. The World can not take this prolonged collapse in crude prices - too many defaults - the ''real'' big money in the world will NOT permit this - Bank on it...way too much is at stake on the 3rd worlds new industrial capitalization. Oil is the lifeblood of the future here - do not discount this fact.
The market called for a double bottom - which we've had, it called for a correction in the overall market which we've had, it called for some consolidation - which we've had in major Oils and the 'patch, it called for signs of a bottom in shareholder rights plans - which we have, it called for the absolute bottom being values near pure liquidaton/book values - which we have, it called for capitulation which we've had by both hedge funds/institutional funds and corresponding dumping of stocks like IO & CXIPY again today... and on & on. What we need now is one major positive event like very positive OPEC numbers or a couple of non-energy sector funds, publically announcing major buys in the oil patch -which we are seeing rumblings of - as we've seen a follow the leader mentality here lately; if it starts off of positive crude news - it won't stop; we just need that 1 event... Buckle up boys - it aint far away...
I still do not have any arguement with anyone holding cash or even selling short for valid reasons... I do not think it is time to buy accross the board yet, but neither do I see it at a level of any remaining substantial accross the board weakness either. It is the time to be a trader and/or an individual stock picker and to buy solid, financially sound niche companies (deepwater - hi tech) off of major selloffs... Some stocks like SCSWF have formed a bottom here, even the selected land drillers; yes Elmer - I too bought PTEN at 6 1/4 today. Love BDI under $5 and am waiting - drooling for UTI to selloff & I'm in there as well. Love RON & EVI on any dips, RIG sub $26, FGII on ANY selloff from here, smaller niche players DRQ, CDIS, OMNI, SCSWF, CXIPY, and VRC & GLBL look reasonable to me as well off any dips - by dips $2 moves down or a decent 1 day bloww off - know why these stocks are blowing off - if news hits the wire for example that the Cambridge hedge fund or the FIDO select energy fund has major redemption trouble and must raise cash - and you see massive selloffs in their largest individual holdings - especially small/mid caps - grab these opportunities ! This is poetic justice for the little guy - buying into the funds capitulating not because they want to - but because they have too !
I could go on & on...there are numerous fundamental & technical indicators of a ''bottom'' here; once again my ''Hand Grenade'' theory holds true here - one doesn't need to call the ''exact'' bottom & being close (to the bottom) does count ! When you have maybe - 15% max downside in a stock like land driller BDI, but 70% upside just in a retracement to the merely average levels of April - not anywhere near 52 week high levels - and keep in mind these guys have been buying Rigs and expanding all through this sell off - they get the SLIDER award for big brass ones... I'll take 15% downside (to pure liquidation/net asset value) as compared to 70% upside any day - give me that risk vs. reward scenario 2 more times in the next decade and I'll retire very wealthy; this is a once in a decade and perhaps a once in a lifetime opportunity. Sound crazy - go back and pull up the analyst reports off of the ''detailed research'' links on Yahoo's ''profile'' link from last fall; you'll see Analyst Target Prices of RON at $100, EVI at $85 , BDI at $30, PTEN at $40 - some of these companies like PTEN, BDI, EVI have acquired and bought Rigs or other companies - their upside is much greater than in 1997... We could easilly see EVI at $120 in 2-3 years; FGII at $75 and so on - run those numbers; EVI from $18 to $120...add a little margin or even some of Diamond H's ''suicidal-gamblers, addict tools'' - commonly called options; and you have some wealth builder returns here !
An average young/middle aged trader, who can afford timewise, to be speculatively - aggressive; could realistically turn $100K into a Million $ in 2 years here. $250K could turn into some real money ...but you gotta buy sometime , somewhere to make money; I'm buying right here & right now & I plan to make a whole lotta money...
Time will tell... Good Luck All. |
