In the past few days commodities have powered our portfolios higher and allowed us to outperform the general market since the election even though we are heavily invested in areas which are lower since that time. This simply proves that this is a stock picker's market and those willing to venture out and buy on well researched plays can turn the table on the general market. We want to see how the year closes, but it is appearing that the areas we are most bullish in are setting up to be the leading themes for 2013. There is a month to go in the year, but at this time is looks like that is the direction we are headed in.
Oil & Natural Gas
Regarding our comments on the Utica and Rex Energy (REXX) recently we do want to make clear that investors need to be aware of what to expect with the company's drilling results when they are released. One should not expect to get results like some of the other players have been getting as the two will not be comparable. The laterals on the wells being drilled are going to be shorter for Rex due to their property situation so one should expect to have results which will be quite respectable when the lengths are considered but possibly disappointing for those who do not understand that it would be unfair to compare these results to others as it would not be an apples-to-apples comparison.
We will be buyers in Rosetta Resources (ROSE) today as shares fell $0.45 (1.00%) yesterday to fall to $44.76/share, which is just within our buying range that we have been recommending for readers. It has worked thus far, and our belief is to do more of that which is working and less of that which is not. For readers not familiar with our views on Rosetta, we believe it is a buy in the $42-45/share range and a sell in the $48-50/share range for those wanting to trade. We would expect to place our trade at some point in the morning should market conditions enable this move.
Another name we have discussed and could be setting up for a trade is Kodiak Oil & Gas (KOG) which yesterday fell $0.13 (1.50%) to close at $8.56/share and right below the $8.60 area which has shown support for longs at various times over the year. The $8.60/share level supported the stock most of yesterday but could not hold it into the close, so now attention must shift to the $8.50/share level where a breach lower would create serious problems for longs. A shakeout of sorts could be coming, and readers should watch for any potential opportunities, be they on the long side or short side of a trade.
Yesterday was the second investor conference of the three that Molycorp (MCP) announced they would be attending earlier this month. Shares were up $0.59 (7.18%) and closed at $8.81/share, so management is obviously doing a good job of communicating to investors their outlook for the company moving forward. It is important to remember that the shares are some of the worst performing of 2012 and the company is dealing with the Securities and Exchange Commission as it looks into the company's past actions. The last conference on the schedule takes place on December 6, 2012 and after that time it may be a good time for bearish investors to return to their positions in the company as tax loss selling picks up.
We get a lot of questions regarding our outlook for precious metals and the various metals, but when it comes to the precious metals everyone seems to want our opinion on gold and whether it is smarter to play platinum and/or silver. We try to be clear in our outlook, but apparently the fact we like certain gold companies has confused some as to the metal we really like, which is silver. We would play silver through physical holdings (which is in our portfolio) or via Silver Wheaton (SLW) which we think gives investors excellent upside to silver prices while also providing a more favorable tax situation for gains than physical lots. We like some gold stocks, but those recommendations are company specific and driven by our outlook on events that will impact those companies - not necessarily an outlook on the price of gold itself. Remember, in times of growth silver outperforms as it has industrial applications as well.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ROSE over the next 72 hours.