4 replies to this topic

[Cirrus]

Yes, it's a good day for energy. There will be corrections...but think about this: 1. Most managers are underexposed to energy. Take a look at a cross section of mutual funds that are permitted to buy whatever sector they want. The 'playbook' calls for underexposure to materials and energy right now and has called for it for months. However, those stocks are still going up. Why?--because the macro world environment has changed over the past 3 years and is dramatically different than it's been for the past few decades. 2. The valuations are cheap, cheap, cheap. Two large cap poster children: GSF--trading at 9 times ridiculously conservative forward earnings; when those earnings are reached they will have more than 10$ a share in net cash on the balance sheet APA--trades at 11 times forward earnings; one of not many blue chips growing production; earnings eastimates based on sub $70 oil 3. I am as convinced that we have passed peak oil or are at worse there right now as I am that I will someday die. What are those ramifications? What 'valuation' should be assigned to those stocks given this event that IS NOT priced in? 4. Most of all energy represented a consumable real asset. Demand is growing and supply is shrinking. I ask myself occasionally why I'm not fully margined and concentrated only in energy. Again, it's as close to a sure investment thing as you'll find in this business. 5. A mania will eventually come. That's the time to sell IMHO.

Edited by Cirrus, 11 October 2007 - 11:55 AM.

[Jnavin]

Alt energy ETF GEX up 2% midday and breaking out of a pennant.

[hiker]

and selling pressure in the sector is absent. institutions have a large profit cushion ...the smart boyz have been in the sector a long while...since 2006 thanks for the good work, as always, Cirrus....and great trading of FCX.

Edited by hiker, 11 October 2007 - 11:58 AM.

[ogm]

Underinvested ? You bet ! I couldn't care less about oil and gas sector till last week. But the setup on the charts is incredibly good after the multi week consolidation on stocks like CHK for example. I'm still a bigger fan of alternatives, and loaded on solar, etc... but I couldn't pass the setup on the big energy charts, it looks so darn good. So I boughta few for the momentum ride.

[Cirrus]

The one issue with CHK is that they're almost exclusively NG. I spent a lot of time trying to pick out companies that were more concentrated in CL, growing production and/or had huge CL assets in the ground, and traded and really cheap valuations. I only own CHK because they are the king of onshore US NG. They have huge reserves and are continually growing production while most other large cap players are seeing falling production.