Commodities Today: Green Across The Board And Activist Investors Buy Oil Names

Includes: CSX, ECA, TLM, UNP, XOM
by: Matthew Smith

It is great to see some of the world's top investors refusing to shy away from putting their capital to work in this environment. Usually cash is king, but it appears that with low rates and a belief that the politicians in Washington will end this standoff before real damage is done that many big names are putting their money to work now. Carl Icahn did this just yesterday via his announcement on Talisman Energy (see article here), more on that below.

We are seeing physical commodity prices rise strongly this morning with lots of green on our screen. Of significance we notice gasoline breaking back above the $2.60/gallon level, natural gas moving above $3.70/MMbtu and platinum continues trading above the $1400/once level.

Chart of the Day:

We will discuss the railroads in more detail later in the article, however we wanted to bring the transports to our readers' attention. They have backed off a little recently but still remain within this well defined uptrend we have seen develop since February and March. So long as this bullishness remains intact, so too shall the general market's.

(Click to enlarge)

Source: Yahoo Finance

Commodity prices this morning are as follows:

  • Gold: $1328.10/ounce, up by $3.00/ounce
  • Silver: $22.45/ounce, up by $0.064/ounce
  • Oil: $103.73/barrel, up by $0.70/barrel
  • RBOB Gas: $2.6479/gallon, up by $0.0218/gallon
  • Natural Gas: $3.712/MMbtu, up by $0.083/MMbtu
  • Copper: $3.313/pound, up by $0.0165/pound
  • Platinum: $1409.50/ounce, up by $7.60/ounce

Icahn's Newest Project ...

We now know who has been behind the buying at Talisman Energy (NYSE:TLM) over the past week or two, and it is Carl Icahn. He has been rumored to have been involved in the name before, but nothing ever panned out but this time he has announced his move via his relatively new Twitter account. Talisman shares were up just over 4.50% during yesterday's session and are trading up nearly 7.50% in pre-markets this morning following Mr. Icahn's announcement after the close yesterday that he owned more than 5% of the company's shares. Talisman has long been an also ran in the Canadian oil and gas E&P space with names such as Encana (NYSE:ECA) usually in the spotlight and always seeming to be a step ahead. Talisman has always seemed to lag its peers in Canada based on stock performance but with Icahn now being involved, and a willing board it seems, we think that Talisman might be setting up to outperform over the next few months.

Talisman shares have lost most of what they gained over the past 5 years and have underperformed. The shares have been stuck in a downtrend over the past nearly three years and it will take someone like Carl Icahn to create value here.

(Click to enlarge)

Source: Yahoo Finance

An Integrated Worth A Look?

We have watched ExxonMobil (NYSE:XOM) transform itself from an integrated oil company into a more diversified production company with their purchase of natural gas shale assets that made them the largest natural gas producer in the U.S. This exposure to dry natural gas coupled with the purchase of these assets at the top of the market have really hurt the company's stock price and stalled their outperformance versus their peers. The shares have recently come under fire and retreated towards their 52-week lows and with the yield now at 2.90% and fast approaching 3% we think that a floor will soon be reached if it has not been reached already. This used to be one of the best run and most admired 'Big Oil' names out there, but with their recent missteps the company has lost a lot of its luster. Value is value though and with a dividend approaching 3% on this name we like value proposition.

Over the past two years $85/share has provided strong support for XOM shares, which is part of the reason we are bullish at these levels.

(Click to enlarge)

Source: Yahoo Finance

Transports Sending Mixed Signals ...

The recent results from Union Pacific (NYSE:UNP) appeared somewhat bearish if one were to have looked at the financial results only, but when looking at the volume figures the picture begins to appear a bit more bullish. We heard some calls from those wanting to get out of the railroads, but we disagree. There are always bumps in the economy and these are the names which feel it first. Our view is that this bump was caused by a slowdown in the economy due to housing slowing (because of rates rising) and the looming government shutdown which is now just hitting us. We remain bullish on Union Pacific and CSX (NYSE:CSX) right now and would actually recommend buying on any sustained weakness. The transports will do quite well when the real economy begins to experience real and substantial growth.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.