We’ve seen a lot of commentary over the last six months about buying the energy downturn — mostly with quotes about “buying when there’s blood in the streets” and “hold your nose and buy” as the only potentially cheap stocks in the market have been beaten-down energy stocks. And maybe it’s a good idea, I don’t know — this all comes down to the question of whether oil and gas will remain low, fall lower, or bounce back up in some sustained way, and so far I’ve never come across anyone who can consistently tell us where oil will be a year into the future.
Predicting the future is a tricky business, particularly in a global market like oil where there are lots of different producer cost structures (very low cost in Saudi Arabia, very high cost offshore Brazil, etc.) and a variety of both political and economic incentives to explore, produce, sell and price the commodity. But, of course, seeing something fall sharply and upset the market, with bankruptcies and panic, gives value-minded investors an itchy finger — buying stuff that’s “too cheap” is what every investor wants to do.
Larson was also looking for volatile, high-opportunity stocks for Energy Stock Alert last year, that was when he teased Ship Finance (SFL) back in early September — and that has held up better than I would have expected during the oil crash, frankly, and better than many of the oil stocks in the downturn (I just checked back on my article about that teaser pitch, and it looks like he was also charging half as much for his newsletter back then).
So with that in mind, Mike Larson at Weiss Research is telling us that he sees a great “energy bonanza” starting this year — and he’d like you to sign up for his Energy Stock Alert ($1,197/year) to enjoy that bonanza with him.
And to get you excited enough to sign up and pony up your cash, he’s saying that he’s got a couple ideas that headline his “dirty half-dozen” energy stocks:
“Early investors in the 2015 energy comeback have the chance to make more money right now than at any time in the last 30 years….
“I saw this coming. I pinpointed the bottom to the day. And now what I see ahead is the biggest energy boom since 1986.
“The bargains are EVERYWHERE — and have the potential to double, triple, or even quadruple your money in mere months.
TWO energy investments you can get started with right away — investments that let you sleep at night, but that could soar in mere months …”
To further whet your appetite, he hints around about these two opportunities… so let’s check out the clues he provides and see if we can name them for you…
“Company #1 — This company is a bruised foreign energy firm based in Europe. It has been making all the right moves lately — slashing $1.3 billion in expenses.
“Now, my work suggests it’s going to go shopping for cheaper, easier-to-develop reserves and production acreage right here in the U.S.! That will give its bottom line a huge boost as the recovery takes hold in 2015 and beyond.
“The stock is already on the move, up more than 30% from its March low. But I think this puppy could easily rise much more in the next couple of years.”
That’s not a huge amount of info for the Thinkolator to chew on, but we have a pretty high confidence answer: This is very likely the Norwegian giant Statoil (STO). They have indeed been cutting $1.3 billion a year in costs, and they’re reportedly boosting those cuts to $1.7 billion for next year — and they have been expanding around the world for many years, first in areas where their offshore experience could add value but more recently in all kinds of oil fields, including US shale areas. They were up almost exactly 30% from their March 16 lows last week, but they’ve had a bad few days so now they’re up about 20% from that low.
“Company #2 — Another opportunity is an offshore drilling rig and ship operator that was left for dead last year. Its share price plunged so far, it was trading at the cheapest valuation since the depths of the Great Recession!
“But this is no fly-by-night operator. The company is backed by a billionaire with decades of experience in the oil shipping and production industry. He also owns almost a quarter of the shares outstanding, making him he’s extremely motivated to right the ship.
“The company recently slashed hundreds of millions of dollars in costs. It built up a war chest of funds to ride out the downturn. In fact, management is so confident in the future that the company’s CFO just said he plans to “come in and swipe the table” of distressed competitors!
“The stock is already on the move, carving out a nice rounded bottom on the charts. But I don’t think it’s anywhere near done!
“Just consider: In the wake of the Great Recession, this stock doubled then doubled again. As a matter of fact, from trough to peak, it surged a whopping 9-fold! That’s enough to turn every $10,000 invested into $90,000!”
Interestingly enough, we can be much more certain about this one — and it’s a stock we’ve spent quite a lot of time on over the past few years, Seadrill (SDRL). I no longer own SDRL shares, but I do have some SDRL LEAP options that I bought when I sold my shares last year — more or less as a way to keep exposure to the segment if it bounces back within a couple years, as some people expect, without having too much capital committed to what is still an extremely levered business with falling demand.
Seadrill is still the best offshore rig company, in my mind, but they’re by no means out of the woods — they’re the best company in an industry that’s at a terrible point in the supply/demand cycle right now, with rates not high enough to cover the costs of the newbuilding rigs that are being delivered, and they have enough debt to make investors twitchy whenever there’s bad news about either interest rates or rig demand.
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