I’m selling Statoil (STO) on today’s bounce because the euro debt crisis has changed the medium-term fundamentals for this Norwegian oil company. As I wrote in my 12:30 May 21 post http://jubakpicks.com/2010/05/21/sell-sure-but-try-to-do-it-on-the-fundamentals-and-not-in-panic/ as hard as it is I think investors should try not to get caught up in panic selling during this market drop.
But on the other hand that doesn’t mean they shouldn’t sell anything.
The euro debt crisis will depress growth in Europe, lowering global demand for commodities such as oil and local demand for commodities such as natural gas. That means that the crisis has changed the fundamentals of Statoil for the worse. I still like the company’s long-term positioning as a natural gas supplier near to gas-starved Europe and its technology edge in exploring nearly opening Arctic waters for oil. (By the way, Norway and Brazil are, to the best of my knowledge, the strictest regulators in the world when it comes to blow out preventer. The failure of an inadequately tested and poorly designed blowout made it impossible to contain the oil flow after the Deepwater Horizon fire and explosion.) I’ve waited to sell until the record date passed for the company’s most recent dividend: Statoil will pay a dividend equal to about 95 cents a share to shareholders of record on May 19. And then waited some more for a bounce. As of May 21, I’m selling these shares with a loss of 14% since my purchase on September 23, 2009. I’m going to sit on this cash for a while in the belief that sometime as early as this fall and perhaps as late as December, I’ll want to buy bargains in currently depressed emerging market stocks. (For more on that strategy, see my post http://jubakpicks.com/2010/05/18/time-to-start-raising-some-cash-there-are-bargains-waiting-down-the-road/ )
Full disclosure: I will sell my personal position in Statoil three days after this column is posted.