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 https://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 https://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.
cjxland on 23 May 2010
arihalli
VEURX is 20% [Grrrowwlll] below recent rally high, and way down in the Secular Bear range from all-time highs 3 years ago. Thinking as an investor rather than a trader, I beleive you would be making a wise choice edging back in now- and I’m with you.
I am wondering if the resumption of the bear markets we are seeing around the world may be harbinging no good for US- investors and maybe particularly traders; maybe giving us a bit of a heads up this time around? Any thoughts? Cjxland: I think we both live to see the dow passing 9k and then some. I have always felt that the dollar is doomed and that its just a matter of time. The gov’t/Fed has been saying they will end the mortgage credit and the supplements to the economy. And now, predictably, Larry Summers says we need a NEW BAILOUT program. Over 30 states can not pay their UnemployBenefits, Mortgages are getting worse. The gov’t continues its high cost wars, etc. The market is overvalued according to PE. The risk is all to the downside with hardly any possible gains to the upside. Sheer fantasy to me. There is no fiscal discipline. And it doesn’t matter. Because i don’t believe we CAN pay the debts off. I still think that 80% cash, 15% precious metals is the best someone can do. I hope i am wrong.
cjxland:
Thanks. It makes sense.
Thanks for the response Jim and advice on Lynas. I’ve got it on a watch list and will hold off as AUS dollar declines.
jamba,
It really depends on where the shipper is located. In the case of CNI, they might see more impact than an American railroad would, because Canada’s economy is based more on resources. You need to look at CNI closely to see what kind of traffic they are hauling.
SOMEONE PLEASE EXPLAIN.
“the failure of an in adequately tested & poorly designed blowout preventer” “Brazil & Norway have the strictest regulations in the world.”
MY QUESTION IS:
Are Norway’s and Brazils regulators bullett proof compared to the regulators used by the gulf of
mexico oil companies ? How would one find out? If they are better built than the Gulf regulators, why are the gulf regulators allowed?
Could it be lobbyist for the oil companies paying off our govt.? That would make our govt. responsible for the spill would it not?
Please don’t ask Jim about a specific stock. You should decide when you buy/sell. I’m new to the market and I’ve read quite a few articles by Jim on MSN. Jim is one of the best. Although sometimes I disagree with Jim, I admire him very much. If you really want to make money from this market, you should focus on understanding the market, instead of looking for some tips from Jim. I was a physicist and now working in the field of computer engineering. I thought the financial market was just some numbers like I did in physics and engineering. I was completely wrong. There’s so much you need to learn. Once you start, it will never end. So people, please start learning and Jim is your best mentor.
I don’t really agree with that the oil price is going to drop this summer. My friends in China told me that the gas price is going up all the time at the local gas station. The biggest problem is not the price. Some times those gas stations just don’t have any gas to sell. India and China need more gas!!!
arihalli
VEURX is 20% [Grrrowwlll] below recent rally high, and way down in the Secular Bear range from all-time highs 3 years ago. Thinking as an investor rather than a trader, I beleive you would be making a wise choice edging back in now- and I’m with you.
I am wondering if the resumption of the bear markets we are seeing around the world may be harbinging no good for US- investors and maybe particularly traders; maybe giving us a bit of a heads up this time around? Any thoughts?
xy I believe Jim’s thinking 12 to 18 months more or less for the “medium term”, at least according to his introductory comments for the Picks Portfolio.
Jim:
You said that STO’s “MEDIUM-term” fundamentals have been effected by the European crisis, though LONG-term is still good. Would you specify how long is your “MEDIUM-term? Thanks.
When looking at the situation in Europe it at some point bottoms out just like it did in the US after Lehman blew up. US multinationals that have taken a hit might be worth a look in the near future in particular a company like FLS. Anyone else thinking that a little more downside in this stock will make it an attractive pick up?
Europe is really getting hammered and deservedly so. If one thinks in terms of an investor and not a trader then wouldn’t dollar cost averaging INTO a generic european mutual fund now be a a wise choice? It would professioinally purchase stocks in europe in a sector that is going down? jmo. It may both have the benefit of a buying low and permitting people in the field to purchase the proper equities.
Jim,
Is there going to be quarterly update on your stock picks any time soon? It seems that there has not been an update for several quarters.
I picked STO as one of Jim’s drops on 19 May (see comments to his “raise cash” post). TC is probably the next candidate: molybdenum, used mainly as a steel additive, won’t soar without demand from aerospace, infrastructure, and construction. MCD is probably also on the short list – it’s one of the “safe” stocks with little near term growth (unless you think they can open another 200k franchises in the next 2 years) – and they’re near their highest ever price.
Ed,
If Jim is right that commodity prices/stocks will move down over the summer will CNI and other railroads see decreased traffic and have their stocks suffer in turn.
Jim,
do you think the propossed 40% tax increase on miners in Austrailia will ultimately pass?
@Astrid
Alternatively, you could go for SCOT – Scotland – and keep your Euro exposure down. I’m sure the government in London would be happy for the chance to reduce their debts. As far as making a profit goes, Scotland has enough potential in renewable power to make itself self-sufficient and export a large surplus. You can add in the scenery and the attendant tourism industry as a nice bonus for yourself!
Shameus, I noticed the new ADR from Lynas. For those new to the topic, Lynas is an Australian rare earth miner that I owned in the picks a while ago. I think I’d hold off a while here on exposure to China and deteriorating fundamentals in th Australian economy. Australian dollar is falling.
im learning a lot, should have been more diciplined with the stop losses, I would have gotten out when it went below 24 bucks.
@Astrid
I think you are making a huge mistake with LIECH; much better choice would be ANDO- Andorra. While LIECH stands a good chance of being bailed out personally by Angela Merkel if necesssary, it is cold and moldy and squashed in there next to CH.
ANDO on the other hand has a strong economy based on tourism, consumes very little oil or platinum or other commodities, is a tax haven so therefore financials-friendly, and its people live a long, long time.
Of course, in these perilous times it could be to your advantage to learn how to short both- possibly with mini-country puts on the DAX? Someone will know how…
Good timing on this, as I probably have more energy stocks than I need. I was wondering what to get rid of. Thanks.
Jim and all:
Lynas recently made available an ADR for American trading LYSDY–and its in the 3.98-4.8 trading range. I don’t know what it’s worth to a value investor (or exactly how these numbers match up to what was before in the 20s range, especially with the market’s dropping), but it might be of interest to some here. Lynas is the australian firm that mines rare earths used in hybrid batteries etc.
If the euro crisis continues to deteriorate I’m wondering about buying one of the smaller countries. Liechtenstein perhaps?
Thanks for the post Jim, as always.
I am naive as to whether IMPUY should be sold. I understand that commodities and companies that export to Europe should be traded for cash on a bounce, not sure if IMPUY qualifies