Two weeks ago, I flew to my old stomping grounds in Houston and visited seven energy companies in three days. The mood around town and in corporate offices was far more upbeat than my last few trips down there, and not just because the Rockets were in the midst of pulling off one of the biggest comebacks in NBA playoffs history.
Despite what you might have heard, the oil business is rebounding.
[note: an earlier version of this post originally appeared on my Yahoo! Finance page.]
A few months ago, Apple (AAPL) posted one of the greatest quarterly beats in the history of capitalism and its market cap–already the world’s largest–officially doubled the size of the next closest company, a little energy outfit you might have heard of called Exxon (XOM). Nonetheless, I wrote a piece for CNBC.com at the time saying that if I had to choose between the two stocks to buy and hold for the next twenty years, I would pick up my iPad, log into my brokerage account and order a whole bunch of XOM.
With both companies releasing earnings this week, it seems like a good time to revisit that call. Apple annihilated analysts’ expectations again on Monday. Exxon also beat, but its profits were off by almost 50 percent and its stock has been the second worst performer in the Dow, down 5 percent since New Year’s Day and over 13 percent in the last 12 months. The oil giant has even ceded the number two spot in market cap to Microsoft for the time being.
So, have I changed my mind? Do I now think AAPL is a better buy than XOM? The short answer is: no. The long answer is: absolutely not.
[note: this post originally appeared on my Yahoo! Finance contributor page.]
Last week, I spent three days in New York City at the annual IPAA (Independent Petroleum Association of America) Conference. Like most people, I’ve been leery of energy stocks in recent months. But I left the conference with a different mentality.
As unlikely as it seems, it might be time to go bargain hunting in the oil patch.
(note: this post originally appeared on my Yahoo! Finance contributor page)
One of my favorite stocks went off the rails a few months ago. After chugging steadily higher and nearly doubling in the first nine months of 2014, railcar manufacturer Trinity Industries (ticker: TRN) went into the ditch—see what I did there?—as one piece of bad news after another hit the company.
T.S. Eliot said April is the cruelest month. He obviously didn’t live through last October as a Trinity shareholder.
My apologies for the lack of blogging lately. Once again, my busy schedule has prevented me from sharing my observations. I did write an article for CNBC.com last week on the trouble with Apple’s recent rally and why I would buy Exxon over the iPhone maker if I had to choose between the two stocks. In case you missed it, you can find it here.
I am going to try to write more in the coming weeks. I have also been invited to become a contributor for Yahoo Finance, so please stay tuned for details on that and other news.
Thanks again to everyone who has bought the book and to everyone who has written to me about it or posted comments here and elsewhere. I am especially grateful to those who have taken the time to write positive reviews on sites like Amazon and Good Reads. Thank you!
[Note: I have a piece up on CNBC.com today about RadioShack’s impending bankruptcy. Click here if you’d like to check it out.]
Judging by the last few days of trading, it looks like oil prices might (emphasis on might) have found a bottom. That would be bad news for big oil consumers like airlines–not to mention ordinary Americans, who’ve been enjoying a de facto tax break at the pump–but it would come as a major relief to anyone hoping for our incredible domestic energy renaissance to continue.
Last week I attended a one-day energy conference in Denver. Sponsored by a West Coast brokerage, 25 institutional money managers and I visited six E&P (exploration and production) companies at their downtown headquarters. Four of the firms drill in the Niobrara, which is the basin underneath Denver that extends to the Wyoming and Nebraska borders. The fifth drills in the Bakken, which is the relatively new basin underneath North Dakota; and the sixth drills in the Texas Permian basin, the largest oil field in the lower 48 states.
The mood in those offices didn’t quite give me flashbacks to my early days in the investment business, when I watched the entire economy of Houston implode during the Great Texas Oil Bust of the mid-1980s, but I definitely experienced a few minor bouts of deja vu.
Unless you’ve been living under a rock or on a commune somewhere, you know the big news in the markets over the past few weeks has been the plummeting price of oil. With domestic production at record levels thanks to the fracking revolution and OPEC stubbornly refusing to cut production, oil is getting cheaper and cheaper. Investors have predictably responded by selling off energy company stocks in a big way. That makes sense. Lower prices mean lower profits and, especially for smaller producers, possible bankruptcy.
But there are two related stories to the drop in oil that don’t make sense, in my opinion–and they could signal potential opportunities on the long and short side.