Bookkeeping: Another Layer out of Energy Stocks
Posted on Friday, May 16th, 2008 | In Current Market News, Stocks to WatchI’m a very long term bull on these guys, but enough is enough (some of these charts, esp. coal, are simply straight up) – taking another $4-$6K out of each position, and layering out. People seem to be throwing in the towel and taking for granted crude goes straight to $140-$150 at this point. If so, we are going to start seeing major demand destruction worldwide. (already happening in the US) Frankly this scenario reminds me a lot of fertilizer 3 weeks ago when everyone said it could only go up, and within a few days they began to sell off. While we cannot expect perfect timing, once a consensus is so heavily weighted to one side of the ledger of ever increasing prices, I begin to take the other side of that and get increasingly cautious.
- Coal: Mechel (MTL), Alpha Natural Resources (ANR), Consol Energy (CNX), Massey Energy (MEE), Arch Coal (ACI)
- Natural Gas: EOG Resources (EOG), Cabot Oil & Gas (COG), XTO Energy (XTO)
- Services: Core Laboratories (CLB), National Oilwell Varco (NOV)
- Exploration: Petrobras (PBR)
I am keeping the deep sea oil drillers as an offset for a continued run and/or takeout potential. I have the urge to buy Ultrashort Oil & Gas (DUG) as a trading vehicle (shorter term) but not until things begin to reverse. Buying this into a mania blowoff top phase will just do more harm than good. But I can see adding this relatively soon…
Continuing to bleed off the best parts of the portfolio might lead to some underperformance in the coming week(s) versus the markets, but I am ok with that. The #1 thing is actual performance (absolute returns) not performance versus the markets (relative returns) so by holding this in cash, we protect from any potential downside. As we trudge forward on the ever increasing slope upward, I’ll be turning more cautious/protective.
This batch of sales generated roughly $50K of cash, or about 4.1% of the portfolio.
For an example of what the typical coal chart looks like ….
Long all names mentioned except Ultrashort Oil & Gas in fund; long Alpha Natural Resources, Mechel in personal account
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 About Trader Mark (http://fundmyfund.blogspot.com)
Mark is a self taught private investor, fascinated by the market since an early age, discovering mutual funds as a teenager in the 80s, and then moving to equities by the mid 90s. His equity focus is identifying secular growth trends, and the companies most likely to benefit from these macro trends. Stocks are identified through fundamental analysis, although basic technical analysis is used in determining entry and exit points. With a degree in Economics from the University of Michigan, a broader understanding of the economy as a whole, along with interpreting investor psychology is also a major interest for Mark. His career background has focused on financial analysis in corporate America. |
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