Investors have been pounded in the commodities space recently and we are seeing prices in stocks not seen in some time. In fact, in many cases the rally that recently took place has seen all of its gains nullified with the current downturn, offering investors the opportunity to redeploy capital from the trades we did in new trades or in some of our favorite long-term trades. We are neutral today, with a lean towards bullishness, and look to build up cash in the present. We continue to believe that the Utica will be a tremendous 2013 story and will update readers on some of our other ideas for the year ahead.
Oil & Natural Gas
We have discussed Magnum Hunter Resources (MHR) and explained how it was on our radar and had been added to our watch lists, but we have seen no reason to purchase shares yet. That, in hindsight, has been a blessing as the stock has trended lower and set a new 52-week low yesterday. We remain interested in the company, however over the months we have found some other interesting plays which we think have better acreage and prospects moving forward. This is still on our list, however it seems to keep getting bumped down in priority.
Also from past discussions we have discussed how we look at Cheniere Energy (LNG) as a barometer for how our energy stocks are going to perform going forward. The stock had held in there pretty strongly, but recently has trended lower and we are now looking at the $14/share area for some support but face the very real prospect that we may be going through that this morning as U.S. futures are lower and the economic news is not great coming from Europe. It sure looks as if the speculators are losing patience with the commodity trade, but this indicates to us that we need to be buying on these dips to prepare ourselves for the eventual recovery and move upwards. We are not discussing buying Cheniere in particular, but just our insights gained from looking at its price action.
Titanium Metals (TIE) saw shares rise strongly after the company announced that they were entering into an agreement to sell the company in a deal valued at nearly $2.9 billion. Shares rose $4.93 (42.61%) to close at $16.50/share with volume of 36.4 million shares trading hands. The company has worked closely with the acquirer, so Wall Street cheered the deal as well, pushing both buyer and seller up on the news. With the growing number of uses for titanium and the aerospace sector taking off with their next cycle of new planes this will be a growth sector for the new company.
Molycorp (MCP) continues to decline, with shares falling another 4% yesterday to close just above $7/share. We try to steer clear of issues with the SEC and stick with those companies which stay out of the cross-hairs of regulators. We doubt that the SEC is going to put Molycorp out of business, but our conviction is not at a high enough level to bet our own capital on that outcome as there are far too many things which could go wrong. For rare earth exposure we would be shifting focus to Australia and Asia at this time.
James Rive Coal Company (JRCC) traded lower again yesterday with shares finishing the session at $2.40/share after falling $0.30 (11.11%). Volume was once again above the three month average as investors had another big down day on their hands. After the movement yesterday, the shares are within the range we discussed in yesterday's article, but that does not make it a buy here, at least not yet. If the general market is content with trading lower on the fiscal cliff and Greece news, then regardless of what they have done the coal stocks shall follow - maybe to a lesser extent, but they shall obey the trend.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.