Interesting pattern in today’s big winners on the New York Stock Exchange: the list is dominated by the names of relatively small, predominantly domestic energy producers.
As of the end of trading in New York today you would have found these stocks among the big percentage winners: Oasis Petroleum (OAS) up 5.9%, Brigham Exploration (BEXP) up 3.4%, Ultra Petroleum (UPL) 4.6%, Swift Energy (SFY) up 3.22%, Chesapeake Energy (CHK) 8.1%, and Berry Petroleum (BRY) up 4.9%.
These energy companies don’t have a whole lot in common—some natural gas producers (Ultra Petroleum and Chesapeake Energy); some produce oil from oil shales (Oasis and Brigham); some work in traditional fields in California (Berry).
But they do have in common a lack of exposure not just to Egypt but also to the Middle East. They’re up as a bet that we’re seeing the beginning of a wave of instability in the region that will make oil from “safe” sources increasingly valuable.
I don’t think I’d chase these here—although I don’t think this trend is over or a flash-in-the-pan, I just don’t want to buy after 10% gains in just two days.
If you like the logic of these stocks, however, I’d suggest that you take a look at oil producers from Canada’s oil sands. Every time the risk of Middle Eastern oil goes up, the more likely it is that developing these huge fields will go full-speed ahead despite all the very real environmental costs of producing oil from Alberta’s oil sands. Suncor Energy (SU), which is very focused on producing oil from this source, is up a 3.8% today. Shares of Norway’s Statoil (STO), not thought of as an oil sands player, is up just a little less than 1%. On January 27 Statoil announced first production from its 60% owned Leismer oil sands project. The first phase is projected to produce 18,000 barrels a day within 24 months. A second phase plus expansion of Leismer will take production to 80,000 barrels a day within five years.
(Just for reference, Egypt, which consumes much of its oil production domestically, exports roughly 89,000 barrels of oil a day.)
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Brigham Exploration, Oasis Petroleum, and Statoil as of the end of December. For a full list of the stocks in the fund as of the end of December see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/.
Hey Jim,
I just heard a video posted advertising how this guy from Stealth watch or some such place…lost the guy’s name…Strea??…something like that sorry…who predicts a bubble burst of the stock market soon and crashing down…and ways of protecting it…since he predicted the 2008 collapse…someone recommended by Hulbert’s Digest??….was interested in your comments…
Respectfully submitted,
I’ve been saying for a long time that Canada is a top choice for investors. Welcome to the party Jim, although buying back Potash at $180 after selling it at $90 is probably not a great move. There are a number of good Canadian oil companies…Crescent Point is one, and a couple of the pipeline companies to move the oil and gas..Transcanada and Enbridge. Nice and safe, pay a dividend and benefit from turmoil. It is too late to buy commodity companies after the news of upheaval. You must plan for the contingency. However the case for safe oil may well get much better. Any hint of turmoil in Saudi combined with a return to economic growth could easily result in oil prices at new records. USDA above also has a point although his stocks are not for the fainthearted and if your timing is a bit off you will not get paid a dividend while you wait. The PBW clean energy ETF is a way to diversify into these stocks since they are very difficult to keep up with individually, regardless of how certain you think you are about any one of them.
Another winning group among energy stocks not tied to the middle east: solar companies.
FSLR, STP, YGE, TSL, and SPWRA all beat the market today. Leading the pack, well ahead, is FSLR, with a 4.81% gain.
During the commodities bull market in 2007 and 2008, solar stocks did well. If the positive correlation between energy stocks and solar stocks is emerging again, I expect FSLR to be the horse to ride. To me, it is unquestionably the best stock in the sector on fundamentals… especially if Jim’s right about the froth coming out of Chinese stocks while the US market heats up.
So far this is the best reaction of all.
http://www.cnbc.com/id/41354207