Canadian Oil — Hsu’s “Big Surge”?

By Travis Johnson, Stock Gumshoe, August 8, 2008

This is a little weekend refresher, for folks who might have missed the writeup the first time around. Robert Hsu has been touting a Canadian oil sands stock that is a play on China, since China is interested in buying their product or partnering with them.

And the company is a better buy now than a few weeks ago, since the fall in oil has brought a bargain buying opportunity … here’s what Hsu says in this latest email campaign, an ad I received yesterday, about the “urgency” of buying now, with oil dipping:

“Hold on to your hat because oil’s headed back up, and our Canadian tar-sand stock is first in line to profit. This stock shot up 70% in the last few weeks, but now it has pulled back as crude oil prices ease. This gives you a rare second chance to get in on this summer’s most surprising double.

“Don’t Wait For Oil’s Next Big Surge!

“I told my Asia Edge subscribers they’d kick themselves if they didn’t get into this Canadian tar-sands stock at $57. It’s now at $73 and we’re refueling for the next leg up to $150.”

He also sent out his ads touting this when the stock was at about $100 near the end of June, so it’s down about 25% from those levels (it’s at $75 today).

Still the same stock, though, and if you believe in the long term case for oil there’s still some value in their holdings — whether or not it’s worth the current price is up to you to decide, of course. And don’t ask me if oil is going to $140 or $100 next, I have no idea … though I tend to think it will be “expensive” for many years to come.

The shares are down markedly with oil falling, and trade at a current PE of about 14 and a forward PE of 8. I don’t know what oil price assumptions they make in estimating profits for these folks, but most analysts seem still to not model future oil prices much above $100 for their estimates, to be conservative, so there may be some potential there. The forward valuation is pretty similar to other large oil companies, and the dividend a bit smaller.

In case you didn’t remember the name of the stock, it’s Canadian Natural Resources (CNQ), and the full writeup is still available here from about six weeks ago.

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A.Nony Mouse
Guest
A.Nony Mouse
August 9, 2008 1:06 am

In Hsu’s latest Asia Edge update, He has a SELL reco on, CNQ, RIO, & BVN, has downgraded MOS to hold.

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spreadtrader
spreadtrader
August 9, 2008 9:05 am

Good recommendations….except sell stops in BVN should have been hit 4/23, 6/10 or 7/23 at the very latest; RIO should have been sold 7/2 and CNQ should have exited the portfolio on 7/3. MOS should have been sold 8/4…..it’s likely headed to 93.00 or lower. The alternative to selling these stocks is buy puts.

Paul Yoquelet
August 9, 2008 9:20 am

Please use Visa nd Mastercard along with your Paypal.

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Gravity Switch
August 9, 2008 9:30 am

Been seeing this a bit more from Investorplace (Hsu and Navellier, at least), teaser stocks being touted in ads after they’ve already been sold — when was that last Asia Edge update?

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victork
victork
August 9, 2008 11:55 am

Although I’ve been an “irregular” member for a while, I never post just read. Between Traviss’ sage wisdom, and member comments, I’ve learned more in a few months than the last several years.

This is the best site I’ve ever found “hands down”. Used to be a Motley Foll member, but just couldn’t stand the constant bull any longer!!!

Apparently I’m not alone. Follow the link to their latest teaser and read the member comments. http://www.fool.com/investing/small-cap/2008/08/01/the-next-stocks-you-should-buy.aspx

It’s pretty ugly.

Thanks you Travis and all that contribute!

Gravity Switch
August 9, 2008 12:08 pm

Just FYI, there’s a solid article in Barron’s this weekend that mentions the haircut that almost all oil stocks have taken as oil has dipped 20% or so — and speculates that this might be a good buying opportunity, with a lot of them trading at forward PE multiples of 6-8. CNQ was one of those mentioned, along with Suncor in Canada, and most of the other big majors (ExxonMobil, BP) and a few others (Marathon, if memory serves).

These companies are almost always fairly cheap, compared to the market, but to be this cheap the market has to be assuming weakening oil prices over the next couple years, certainly signficant drops from the current $115 or so — and I expect a fair amount of that is institutional memory among investors about what happened to oil company stocks when oil seemed stuck at $20-25 a barrel.

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Carlo
Guest
August 9, 2008 12:40 pm

A quick analysis about latest Hsu’s sells (BVN CNQ and RIO) can be found here: http://investorcrap.blogspot.com/2008/08/latest-mr-hsus-performance.html

John Sloan
Guest
August 9, 2008 1:01 pm

Hi Travis and all. Interesting to me is that when oil future dropped Friday my Exxon, Chevron, Marathon and Valero all went UP. Marathon and Valero especially are hurt, not helped, by high crude prices. And while Exxon and Chevron of course profit from high crude their refining margins are hurt.
For instance – latest Exxon report shows that their upstream earning went from $6,041 million in first quarter 2007 to $8,785 million in 2008 while their downstream earnings went from $1,912 million in 2007 to $1,166 million in 2008. At same time net production of crude and NGL fell from 2,746 thousand barrels daily to 2,474. and refinery throughput fell from 5,705 to 5,526.
best wishes

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SageNot
Member
SageNot
August 9, 2008 2:36 pm

FWIW Jude & others, the buying of options is much less risky than if you write (sell) options. The buyer only risks the premium paid.

Don’t overlook the sharp dollar reversal, it’s knocking out some of the premium built into crude oil contracts. Note that Russia messing around with Georgia hardly dented the fall of crude last week, not to mention how many old Soviet Bloc countries now have that concern to put up with.

Natural gas has fallen even faster & with fall/winter on the horizon, I’d focus more on the stocks that supply (& service) natural gas once the bottom is reached. Nobody will ring a bell, which is why I use TA for entry points. CNQ is just one stock that would surge once natural gas reverses.

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Denby45
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Denby45
August 10, 2008 2:23 am

I fully believe that this drop in commodities will be short lived and a great oportunity has presented itself. I have been following one tar sands stock for a long time now and have loaded up every time it has been shorted down. The stock is CLL.TO Connacher Oil. They are in the process of ramping up to 10,000 barrels/day at their great Divide project and are about to release earnings on 12th Aug. There is also a pending approval for their second 10,000 barrel SAGD project ALGAR. They also have some conventional oil and gas and a refinery in Montana. It has been beated down with the rest of the oilsands stocks but what’s not to like here. I am expecting good results and there does not seem to be much downside risk here with plenty of upside potential. Of course please treat this as a heads up only and do your own DD.

Den

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spreadtrader
spreadtrader
August 10, 2008 6:48 am

How “short lived”? For whatever reason, the markets are telling us that the boom in oil is at the very least in a corrective phase for now. The charts are saying it is not yet over with; therefore, the question is: HOW LONG must you hold stocks like Connacher that are somewhat speculative, pay no dividend and (at least for Connacher) has traded in a range of 3.00 for almost three years? At least a company in the same sector like FDG, Fording Canadian Coal Trust (not a recommendation because I don’t know enough about its fundamentals) is still in an uptrend and pays a huge double digit dividend yield. Fording’s charts look excellent compared to CLL. Personally, if I have to own companies in unfavored sectors I’d like to own high quality and avoid speculation…..it’s Sunday……..and if somebody has to be the “devil” it might as well be me.

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spreadtrader
spreadtrader
August 10, 2008 8:37 am

OK………now I’m revved up about FDG as a potential trading vehicle and the comment about how selling premium is risky. Here’s a trade you should do on paper if you have little or no experience reading charts. It’s called a “collar”. Buy FDG (or any optionable stock you REALLY have to own) at 85.00 in 100 share lots. For every 100 you buy, also buy 1 January 2009 75.00 put for about $2.00; and sell 1 January 2010 95.00 call for about $4.00. You should get a credit for this trade that will more than cover your transaction costs. IF the stock corrects downward soon (as I think it may do) you’ll sell the put, buy back the call and make money on both option trades. (The “trick” will be recognizing the bottom, which is why you need to know how to read a chart). Meanwhile, you’re holding a high yielding commodity stock and you can add to the position at a lower price with the profit from the option trades. If the stock takes off and gets called away, you still make money. So yes, there is risk in selling NAKED premium. But you can make good money with little risk if you sell premium correctly.

Alternatively, don’t sell the call, just buy the put when you buy the stock…..it’s cheap insurance.

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Denby45
Guest
Denby45
August 10, 2008 11:25 pm

Spreadtrader,

That looks to me like good advice and I guess some of the others might use the technique you have pointed out. Unfortunately I am not a trader of any sort and do not know enough about that game to participate. Maybe one day I will do the necessary to learn more but these days I am just too busy. It is more of a hobby for me although I have done OK so far and after three years still consider myself in a learning curve. Thing is I am not sure we should be comparing CLL to FDG as they don’t seem to me to be similar at all. I do agree however that CLL is today a speculative stock and has done nothing over the last couple of years. However please correct me if I am wrong but I did think that volatility is a traders friend and the ups and downs of a stock like CLL drums up great oportunities for you guys.

Den

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