Last February, I wrote a thought exercise of sorts for CNBC.com weighing the stocks of the number one and two companies by market cap at the time, Apple and Exxon.
Apple, as you may recall, had just turned in one of the greatest quarters in history, annihilating estimates with record smashing iPhone sales. Its stock had shot up to $128/share, and just about everyone expected it to climb higher. Pundits were breathlessly debating how soon Apple would become the world’s first trillion-dollar company. Exxon’s stock, by contrast, was $88/share and not many people were touting it as a buy. Oil prices had crashed to $50/barrel, from over $100 less than a year earlier, and a recovery was seen as unlikely.
Despite these factors, I wrote that if I could buy only one stock between the two and hold it for the long term, Exxon was a better choice than Apple. A quarter later, as both companies prepared to release earnings again, I reiterated my preference for the energy giant.
A few months ago I traveled to Houston and wrote about the increasingly upbeat mood I encountered at the energy companies I visited there. I came away from that trip thinking that well-managed service and exploration firms might be attractive investments. Many had declined 40-60 percent in response to oil’s decline from $104 last summer to the low-$40s by late fall. As oil prices rose past $60 this spring, I suspected these stocks could eventually rally.
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: 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.
(Note: I have started writing for Yahoo! Finance’s new contributor platform. This piece originally appeared there. You can find it by clicking here. If you have a tumblr account, please feel free to follow me to receive my latest posts in your dashboard. If you don’t, I will continue to post them here, as well. Thanks!)
With the Nasdaq hitting 5000 last week and all the talk about whether we’re in a new dotcom bubble or not, it’s been easy to overlook something: most stocks are having a ho-hum 2015, at best. After Friday’s steep selloff, the Dow is virtually flat since January 1st and the S&P 500 is up a grand total of 13 points, or .6 percent, over that same period. The Russell 2000 has fared slightly better. It’s gained about one percent. That’s not bad. But it’s not exactly the stuff that bubbles are made of.
So, is the bull market stampede finally starting to slow? I’m always hesitant to make predictions. For all I know (or anyone else), the markets could rally again this week and shoot up double digits yet again by year’s end. But I will say that the same negative effects that have dampened stocks so far in 2015 will almost certainly get worse in the coming months.
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.
Wednesday was a big day for my fund. Earnings season is upon us and two of our largest longs reported quarterly results. I expected both companies to smash analysts’ estimates. Sure enough, that’s exactly what happened. You’d think I’d be celebrating big gains in both stocks, but unfortunately, you’d only be half right.
Too bad this isn’t baseball. Batting .500 will get you into the Hall of Fame in that sport. In my game, though, it generally won’t get you too far.