Oil Hits $100: Time to Look at Transocean

Well its finally happened. Oil breached the triple digital per barrel threshold. It was bound to happen as the supply numbers dimished rapidly and all the civil unrest in the oil producing nations around the world.

Oil eased a bit from record levels but still managed a record close above $99.
Going into the spring, its anticipated that oil will retreat from these lofty levels, but from a technical trading standpoint, oil is still headed slightly higher. The psychological level of $100 is firmly being pushed on the commodities front.

There's a possible trade here, and I specifically like the drillers, such as Transocean (RIG), whose offshore operational rigs are plentiful and among the best in the business; the company just got another endorsement from the famous Jim Cramer. While RIG has indeed doubled over the course of a year, the important earnings metrics haven't yet flown off the handle. So there is still some room there to expand future P/E metrics. But as energy and oil related stocks reach further and further highs, it'll take rationality to not get caught up in the expected seasonal fall.

Disclosure: Author does not own RIG

Comments

[Vegasjoe]

I liked "RIG" as $80; now it's $145+; you must be a momentum growth guy who finally is convinced!

[krasowskic]

I've been in and out of Energy related names over the past year or so. I think there's still room here, obviousy $80 turned out to be a great entry point, but at the same time we are at 90+ oil, so the climb in the commodity is what has really brought out the stock price increases. At this point in RIG, I think that even a seasonal oil fall will not hurt RIG's stock as much as it would have in the past since key metrics aren't yet overvalued and the oil game will be fierce and very rich as supplies get even more strapped in 2-5 years time.

[krasowskic]

More over, while RIG is a great long term name for the above mentioned oil supply channel, I'm specifically talking a trade here because I think oil can get a pop higher if it breaches the $100 level for good, and I think its headed there sooner rather than later.