Sell GulfMark (GLF)
I’m going to take my own advice (see my post http://jubakpicks.com/2010/03/09/stocks-show-signs-today-of-having-more-fuel-in-the-tank/ ) and use this rally to sell GulfMark. I think fundamentals in the oil industry have turned, if not against, at least away from this provider of offshore service vessels to drilling operations.
A number of oil producers are talking about cutting back on their North American drilling operations, and while this is primarily directed at land drilling, I think it has a spill over into capital budget for all of North America. (For the surge in dry holes see my post http://jubakpicks.com/2010/03/09/oil-drilling-failure-rate-plunges-at-the-western-majors/ )
Unfortunately for GulfMark, 37 of its 88 offshore support vessels operate in the Americas and by far the majority of those operate in the Gulf of Mexico. Almost as many of the company’s ships operate in the North Sea. The rough weather there cuts competition since few companies own ships that can handle those tough conditions but the North Sea is seeing a slowdown in activity too as the fields there age.
Southeast Asia looks like a growth area for drilling and for GulfMark but competition with local companies is intense in that market and that leads to lower prices.
As of 11:30 a.m. ET, GulfMark was up almost 20%–19.3% to be exact—from its low on February 11. I’m still showing a loss of 7.2% since I added the stock to Jubak’s Picks on September 17, 2009. With this sell 14% of Jubak’s Picks is in cash.
Full disclosure: I do not own shares of any stock mentioned in this post.
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Wasn’t the best pick.
Can’t win ‘em all JanDav. Jim’s long-term record is outstanding, how about focusing on the positive?
I like the addition of saying what the current allocation to cash is.
Anyone know much about VLO? It’s still a fraction of it’s 2007 price but I’m not sure what it would take for crack spreads to rebound. Anyone have thoughts on when this could start to rebound (and why)?
the best trades are knowing when to take a hit and move on.
Timing was off for GLF but it could become very attractive again in near future.
Gus,
All I know is (with respect to Russell Krustovsky, aka Krusty the Clown) I wouldn’t touch the refiners with a 10 foot clown pole. Arguably, no one is squeezed harder by high oil prices
Hi Jim what does this mean for STO and RIG?
Jim-When you state your cash position after the GLF sell is 14%. When you recommend a stock to buy how much are you buying as a % or $ amount?
TWO long-term US backers of Fortescue Metals Group have reportedly sold significant chunks of their shareholdings, raising questions about their support for the Australian miner.
(That explains that!)
http://www.theaustralian.com.au/business/harbinger-leucadia-sell-fortescue-stake/story-e6frg8zx-1225839330305?from=public_rss
Hi Jim,
regarding oil prices. I understand that higher exploration and productions costs will squeeze the majors’ margins even if oil prices go up. So what about an oil ETF as an alternative? Or possibly schlumberger, since the majors will want to get some technology to increase their success rates.
Jim
After you recommended GLF, I waited for a buying opportunity and got it for $27.60. Today I followed your advice and sold for $28.60 and a 3.6% gain. Thanks for the pick.
This is a tough one for me….XOM is in my basket of “forever” stocks…but maybe I can buy it cheaper later.
Let me try to answer a number of questions at once:
I buy equal dollar amounts of each stock. Currently a buy is $12,000. I adjust the buy in if/when I rebalance the portfolio at the end of the year. No rebalancing at the end of 2009.
Schlumberger (SLB) is a long term winner from current trends in the industry since they have the technology that national oil companies would like to get but they don’t come with the baggage of being a Western oil producer. The recent acquisition of Smith International is going to make it hard for the stock to move much in the short-term though because the deal is going to get a lot of anti-trust scrutiny (especially in Europe) so n o one is going to know for a while what SLB has to divest. And that keeps the economics cloudy.
And finally wouldn’t disagree that this wasn’t the best of picks. I think I bought it as a way of doubling my position in RIG without thinking about the very different international exposure of the two companies.
Jim,
Don’t sweat it. We’ve all been there.
Jim:
Thanks for the update! Any thought on TOT?
gusspresso24:
In my amateur opinion, it’s only a matter of time before the refiners ‘pop’. It will probably be based on speculative fever rather than fundamentals; I suspect people haven’t forgotten the altitudes from which the refiners have descended. VLO is in the news hoping to unload capacity and trying to figure out what to do with excess facilities including their Aruba refinery. Even if spreads don’t improve markedly, VLO could rise if they are successful in further cost cutting. But I suspect there is ample hot money waiting on the sidelines because just today VLO is up 5% and FTO up 7.4%. If the faint glimmer of an inflection in the jobs market is truly on the horizon, there will be plenty more hot money for the likes of RIG, GLF, the refiners and other petrol services like SLB & ENB. Get in early because it is likely to be a bumpy ride – and certainly ENB isn’t waiting. All this in my very amateur opinion… [I own RIG, PBR, & FTO - sold the GLF today (no regrets Jim - you rock!)]
Why, why keep trying our luck with refiners. Sometimes, it feels that we must learn NOT to fall in love with a particular stock or sector.
I maintain a list of Jim’s stock picks, then wait and wait till they come on sale – they always do. I have numerous examples where Jim’s selection and my timing has been just perfect. As for selling, I usually sell whenever it is up 20% or when Jim suggests to sell. But again, I believe he is early in his sell call – so I just put a trailing stop order and let it ride. Never missed (except for GLW – sold too fast on his recommendation).
Forget VLO etc. – why risk it. Just pick up RIG and maybe some PBR (if you dont have them). I do own them, but have successfully traded in and out with RIG; though maintaining a base position for long term.
Finally, when Jim suggests sell – you/we dont have to sell the whole lot! I just sell a portion and sometimes sell covered calls and wait it out.
Good luck
Mr Jubak,
When you buy 12,000 of stock, do you buy all 12k at the market all at one time, or do you go in a little at a time over a day, or over a few days ?
I guess this question is to anyone, ( not necessarly Mr jubak ) who deals with a large amount of money, and wants to buy a stock in the market.
Thanks
Robert
Hey Jim,
I bought GLF early in Feb. when you recommended to buy, and sold Mar. 10 when you recommended to sell. Up around 19% in one month, great advice!
Just my two cents, but if I buy anything in the oil industry, it’ll be an ETF based on oil futures. I wouldn’t touch the companies around, because their profits will get squeezed by their own rising costs. While they might make more money, it won’t be as much as you’d get from the commodity itself.
I bought in early at 34 and then doubled position when it was down at 25 which helped ease it a bit. Maybe i’ll get a little spike and break even but i want to get out soon.
Jim,
Chinese food inflation was up 6.2% in Feb. As China has roughly 22% of the world’s population, the trend is likely to continue. What’s a good way to play this food inflation theme?
In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.
Peter Lynch
I’m afraid this and Ritchie Brothers were both dogs. I never like any stock that involves ships and I should have known better having been in the business.
Thanks for the tips :O) Looks like I gotta do more research. Doesn’t look appealing right now though.
Ditto the kudos for the cash position statement – that info really puts valuable perspective on your Picks overall position.
I’m not going to open the whole ‘timing’ debate from the other day…..but, I’m currently up over 11%, and will be happy to sell.
Jim’s recommendations are well thought out and well researched (IMO). However, as noted by several followers of this blog, it is his analysis of trends and the impact of world events that should earn your interest and respect.
I don’t think he has a crystal ball—but maybe one heck of fortune telling machine.
Keep it coming Jim, I want to read it all and consider it against my own strategies.
Any explanation as to why Gulfmark is so active?
Earnings come out next week.
I held on and am now feeling greedy.