Energy prices have been buoyant so far in January 2006 (as expected). I continue to see this as an extension of strength in the broader market.
However, there is a fair bit of fear premium coming into the energy markets (Iran). The Middle East story is a major reason to have some energy exposure in your portfolio.
The jury is still out as to whether or not Oil will surpass its old highs of $70/barrel or make a double top and correct hard down to lower $50s/barrel (my view).
What I feel is a reasonable expectation is a rally in natural gas (natural gas prices are off over 40% from their highs).
Therefore, I think there is still enough room for profit in select energy stories.
I am inclined to be a little more exposed to energy than I am now. Hence my purchase of Tengasco Inc. (NYSEMKT:TGC).
Tengasco, Inc. is in the business of exploring for, producing and transporting oil and natural gas in Tennessee and Kansas. The Company leases producing and non-producing properties with a view toward exploration and development. Emphasis is also placed on pipeline and other infrastructure facilities to provide transportation, processing and tieback services. The Company utilizes state-of-the-art seismic technology to maximize the recovery of reserves.
What appeals to me most about Tengasco is the level of insider buying over the last 8 months. Approximately 730k shares @ 23c average / share.
I also view favorably the low price to book ratio (1.28) and low debt levels.
TGC is now trading at 46c after trading as high as 99c over the preceding 52 weeks. In the absence of any significant news the price has declined on the back of a gut wrenching correction in natural gas.
The chart resembles a text book correction and the price seems to be finding a base at the 40 – 45c levels which I think will hold.
I feel it is worthwhile accumulating TGC at these levels. I will place a stop loss at 25% below my purchase price. I will take profits by selling half of my holdings when the price reaches 70c:
TGC support should hold (blue line) after recent correction from 99c.
Money Management: I will commit 2% of my portfolio to this position.