Commodities continue to be especially hard hit, but with Europeans revolting across the continent against German-led austerity measures it appears that easy money will have to come from the European Central Bank. The US might have to ease again in order to help their European counterparts, and it is becoming obvious that the EU is beginning to drag down the world economy. Make no mistake, it is not because of chance that as Europe has slowed, China (which Europe is their largest trade partner) has slowed as well and now both of those regions are now slowing profit growth for multinational companies. If you disagree simply look at the earnings reports from any number of multinationals and you will see how serious this situation has become. Central banks will be forced to act sooner rather than later.
Copper
Thompson Creek (TC) had a rough day yesterday as the shares fell $0.89 to close at $4.64/share on volume of 13.5 million. Volume was over 6x normal, and this was due to the company doing a $200 million financing. Part of the financing will be Tangible Equity Units and will dilute current shareholders. The money raised from this will be used to general purposes as well as to fund the Mt. Milligan copper-gold mine.
Southern Copper (SCCO) was essentially flat for the day, but trading at $32.24 has the company's shares trading in the upper-mid range of their 52-week high and low. The stock currently yields 6.6%, which is misleading as the company's shares are fairing much better at this point than competitors. Investors should recognize that this is a volatile stock though, as its Beta comes in at 1.93.
Oil & Natural Gas
Chesapeake Energy (CHK) traded down $0.26 (1.5%) to close at $17.13 in regular trading, however some of this was made back as news came out after 4 PM that its largest shareholder Southeastern, is apparently ok with the company looking at a sale, and actually wants to make sure that the company does not walk away from potential deals b/c of the low stock price. Southeastern is the owner of 13.6% of shares. Interest is still high here with over 31 million shares traded, and today should be no different based on last night's news.
SandRidge Energy (SD) traded higher during the day and it looked like with the strong rally midday that the shorts had been chased off. Wrong-O as my mentor was fond of saying. The shares gave up all of the day's gains as it sold off into the close. Interest is still high, with the company trading 14 million shares, but each rally seems to be met with heavy selling - which is not bullish for the company. With that said, we like this one long-term and based on financials and risk, recognize that it is a safer bet than Chesapeake. That might make some people mad, but it is fact and facts must be accepted.
Kodiak Oil & Gas (KOG) has rallied since its earnings. The shares yesterday were up $0.42 (4.86%) on volume of almost 12 million - or 3x normal volume levels over the past 3 months - and closed at $9.07/share. It is good to see shares back above the $9/share level and find it interesting that out of all of the E&P plays we follow that Kodiak has essentially held in the strongest. We like Kodiak a lot, have traded in and out, but felt that other companies had better prospects - but it appears so far we have been wrong and should have indeed kept our positions in Kodiak longer than we did.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
