Sell Encana (ECA) out of my long-term Jubak Picks 50 portfolio

The December 2009 split into two companies was supposed to highlight the value of the U.S. and Canadian natural gas assets that EnCana (ECA) kept. (The new company Cenovus (CVE) got the Canadian oil sands and refining assets.) Instead it has wound up emphasizing EnCana’s exposure to a glut in North American natural gas that could keep prices depressed for years.

Now EnCana looks like it has decided to invest in reversing that 2009 split by putting about 20% of its capital budget into developing reserves that are rich in natural gas liquids and oil. Read more

I added Pioneer Natural Resources to my long-term Jubak Picks 50 portfolio http://jubakpicks.com/jubak-picks-50/ on Friday, January 13 (http://jubakpicks.com/2012/01/13/10-stocks-for-10-years-2012-edition-my-annual-update-of-my-long-term-jubak-picks-50-portfolio/ )

To understand why I’m picking this oil and gas company from a long list of alternatives you have to get deep inside the U.S. oil boom going on now.

That boom is a result of oil companies bringing new technologies to bear on fields that were thought to be near the end of their lives or on fields that were thought to be impossible to drill.

Pioneer’s Spraberry field fits that first category. The field is one of the oldest—and largest—in the Permian Basin and despite having drilled in the area since the late 1980s, Pioneer continues to expand production by using technology to drill into deeper formations that has almost doubled estimated ultimate reserves. Pioneer has 900,000 Spraberry acres under lease.

Those estimated reserves don’t include what looks like it will turn out to be a major new Permian play from the deep Wolfcamp Shale formation. Read more

France and Austria lose AAA ratings; still AAA-rated Luxembourg, Finland, and the Netherlands put on negative credit watch by S&P

First, it was a rumor, then a report, and now it’s confirmed fact: France has lost its AAA credit rating from Standard & Poor’s. Finance Minister Francois Baroin told French television today that the country had suffered a one-level downgrade. After the New York markets had closed S&P confirmed the downgrade of France and added downgrades of formerly AAA Austria and further downgrades of Spain and Italy. Luxembourg, Finland, and the Netherlands kept their AAA ratings but got dinged with a negative credit watch. (Meaning they’re in line for a possible downgrade.)

Baroin fell into line with recent comments from French President Nicolas Sarkozy and downplayed the significance of the downgrade. “It’s a reduction of one level; it’s the same level as the United States,” he said. “It’s not a catastrophe.” Sarkozy is facing a tough re-election campaign and a downgrade certainly won’t help.

But I’d agree that it isn’t a catastrophe—especially since financial markets have seen this coming (although not this quickly in 2012). However, it will make life tougher for the EuroZone rescue fund, the European Financial Stability Facility. The fund sells bonds to support troubled EuroZone members such as Portugal and Ireland fund their debt at a lower interest rate than these countries can get themselves in the financial markets. (If they can get funding from the financial markets at all.) The fund pays a lower interest rate because of its AAA credit rating. But that AAA rating was based on the AAA rating of EuroZone members Germany, Netherlands, Finland, France and Austria.

Today’s action by S&P removed two more AAA-rated props to the fund’s own AAA rating. And put the AAA rating of another three in doubt. That leaves Germany as the sole solidly AAA country in the EuroZone.

The euro today fell to its lowest price against the U.S. dollar in 16 months at $1.2665.

Buy Polypore International (PPO)

I’m adding shares of Polypore International (PPO) to my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ today.

Shares of Polypore International got hammered by the scare about the danger of fire in the batteries of General Motors’s (GM) Chevy Volt.

That’s totally understandable. Ion exchange membranes for lithium batteries used in portable electronics and electric-drive vehicles make up about 24% of the company’s sales over the last four quarters. (Separators for traditional lead batteries make up about 50% of sales.) And separators for electric cars are by far the biggest opportunity ahead of Polypore International. The company estimates that an increase in the electric car share of the global vehicles market to 5% from less than 3% today would double the demand for ion exchange membranes for lithium batteries.

Anything that threatens to slow that growth rate is therefore a big deal for Polypore International. And the news at the end of November that the National Highway Traffic Safety Administration had launched an investigation into battery fires in the Chevy Volt certainly qualified as big news. Shares of Polypore International, which hadn’t exactly been tearing up the track anyway, fell from $51.95 on November 28 to a low of $43.18 on January 4, 2012.

But in recent days the shares have rallied back to $52.32 as of 2:00 p.m. New York time today, January 12, and in the process have moved back above their 50-day moving average. Next resistance is at $52.85 (the 200-day moving average) and then $55 (the gap in late November.)

So what’s happened to turn the shares around? Read more

I’ve often said that you can’t judge a portfolio until you see how it does in both a roaring bull and a raging bear.

Did the market gods have to give me my wish?

My long-term portfolio, the Jubak Picks 50, has done just fine in bull markets. Based on my book The Jubak Picks and started on December 30, 2008, the portfolio http://jubakpicks.com/jubak-picks-50/ gained 57.8% in the bull year of 2009. (You’ll remember that the stock market bottomed in March 2009.) And it did okay in 2010, too, gaining 20.1% that year. In those each of those two years the portfolio beat the Standard & Poor’s 500 Stock Index hands down: The S&P 500 gained 26.5% in 2009 and 15.01% in 2010.

Then came the bear market test of 2011. The portfolio lost 18.59% last year. That’s against a 2.11% gain for the S&P 500.

For the three years, the Jubak Picks 50 was up 54.3%. That’s against a gain of 48.5% for the S&P 500.

That’s an extra 5.8% for the Jubak Picks 50 over the S&P 500. (Yes, the actual advantage would be lower since the Jubak Picks 50 incurs trading costs that an S&P 500 index wouldn’t. But I’m only doing 10 trades a year so, in these days of $10 trades (or less), we’re not talking about a lot of commissions costs.)

Is this a good or a bad result? Read more