written by reader Energy, oil and speculation 2018/2019

By fabot, October 7, 2018

I notice in Travis real money portfolio there is not much weight on energy related stocks, and corresponding speculation (ie. call).

I wonder
– if my statement is correct or just an impression, and what are readers thoughts.
– what is the main reason of that, if there is any.
– and last, if Travis /readers could share some ideas /suggestions on this speculative topic, particularly now that momentum is taking on and lots are riding this trend.

Thanks all.

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

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gdoggcrunch
Irregular
October 7, 2018 11:45 am

I like EGY although it made a big move and kind of got stuck here. It should trade off of Brent. They did hedge about 1 quarters production, but still seem to have good leverage to Brent pricing. The management is looking to expand reserves and should have a solid balance sheet this Q. The PE is stupid low, but its wells are in Africa. Seems like the market likes crap oil companies and this one gets overlooked.

Another one I uggghh like is CVIA. Unfortunately I was in the sand biz for years and when Fairmont (frack sand) merged with a more diversified sand producer, it looked like a sensible merger. My personal bias/knowledge played in this. They’ve been crucified. Others like HCLP, SLCA and SND have been hit too, as pricing pressures have hit the frack sand industry. So the question is, are we at bottom? How cheap can these things go. I like CVIA because they are diversified to some extent away from fracking. If we ever build Walls and Roads, that takes lots of sand and thats what I was banking on. I think if Trump gets any kind of win out of the election, then these companies could go. Check the EV/EBITDA multiples on all these. If you have no exposure, I’d try and wait for a clear bottom. May be worth waiting till after the election.

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dbc320
Member
dbc320
October 11, 2018 11:47 am

Hi, I’m a very new irregular but thought I’d join the discussion. I read recently, Trump wants the Saudi’s to pay for their own defense. Maybe he is tired of the US being the unpaid police force of the world. Not to get into politics, but I think I read if we did this, it would remove the requirement of only using dollars to trade/sell oil worldwide aka the Petrodollar. I honestly don’t know if this will drive up the price of oil, or reduce it? I also read Venezuela’s in trouble economically and are big oil exporters. Will this drive up or put pressure on the price?

I recently bought some Marathon Oil. I also have a limit order in for an energy ETF. Schwab gave Marathon an A rating. It does appear to be a forgotten sector. Just me 2cents. Again newbie and love this service of sharing info and ideas.

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Travis Johnson, Stock Gumshoe
October 11, 2018 12:14 pm
Reply to  dbc320

The Trumps seem to be pretty closely connected to the Saudi ruling family, not so different than the Bushes in that regard (though it’s a less “friendly” arm of the Saudi family now in power, perhaps). President Trump has spoken about the necessity of selling more arms to Saudi Arabia for economic reasons, and has talked some in other relationships about wanting other longtime allies to take up the cost of defense… but it’s quite hard to discern what’s negotiating talk and what’s a likely trend.

The demise of the petrodollar is a gradual thing, I expect, and will probably continue thanks mostly to the fact that there’s now another huge customer (China) and the US is less and less reliant on importing oil from overseas… it’s bad for the dollar, generally speaking, since there will be less demand for the dollar in daily transactions around the world — but every other major currency has a lot of hair on it, too, and US interest rates are the highest in the “investable” world, so the dollar doesn’t seem to be at any risk of declining absent runaway inflation. We’ll see.

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