Commodities are getting hard to watch on a daily basis, and especially so for those which energy is derived from. Coal continues to be a big loser - but luckily that is one area which we have been bearish on for some time - followed by oil's recent price action. If natural gas had not recently rallied, we would most likely throw it in as recent underperformers, but the economics of that industry are slowly turning. The glut will not be solved in the next few months, but the market at least has hope ... which is far more than we can say for other sectors in the commodity area.
The sell-off yesterday sapped all of the gains the commodity focused stocks had put up, and just highlights what little faith the market has in Europe and China turning around. Economic growth leads to higher commodity prices, so until we get that growth or a sense of hope that growth is on the horizon then we are most likely stuck in this trading pattern.
Oil & Natural Gas
SandRidge Energy (SD) shares fell $0.27 (4.26%) to close at $6.07/share yesterday on volume of 10.1 million. We did not end up buying the options yesterday as there was bad price action and a larger premium than we had expected. We stayed away and in hindsight it was the right call. After the pressure yesterday, it will be interesting to see if SandRidge can stay above $6/share which will be hard to do if oil continues lower -- but something for investors to keep on their radar is that OPEC has meetings this week.
Alpha Natural Resources (ANR) had another rough outing yesterday. Shares closed just above their new 52-week low, set in trading yesterday, at $8.46/share down $0.86 (9.23%) on volume of 18.8 million. People have thought we were crazy to think that this was going into the single digits, but here we are and worse yet for investors already involved in the shares is that these are now all-time lows for the company. This is all on the heels of the company's announcement of a closure of 4 mines and the curtailment of other production at the end of last week. Sadly, shares probably head lower as the entire industry adjusts to the new realities that face the industry as a whole.
Agrium (AGU) closed down $0.79 (0.99%) to close at $78.70/share yesterday on volume of 891 thousand. After hours the company announced that it would deliver results at or near the top end of their guidance range moving forward, which is better than what others in the industry have been doing. We do not currently like the industry as we have been burned by this not performing as expected this year, but this is probably the best way to play the fertilizers right now. The company is a diversified play and has operations spread out to service markets where others do not.
AK Steel (AKS) was downgraded by Dahlman Rose and Goldman Sachs yesterday, even as Goldman moved their expectations up for commodities. One would expect with higher commodities there would be higher demand and thus prices for steel, but Goldman lowered their opinion for the shares anyways. The shares ended up down $0.81 (13.97%) to close at $4.99/share on volume of 20.1 million. The closing price was just above a new 52-week low, and this has honestly gotten to be an ugly scene over the past few weeks.
Investors saw Energy Solutions (ES) get hammered yesterday as shares fell $1.97 (54.87%) to close at $1.62/share on volume of 32.1 million. There was huge volume for the stock, which was over 30 times the three month average on news that the company lowered guidance, hired a new Chief Executive Officer and a new Chief Financial Officer. All of this contributed to the downward movement as the market absolutely did not like this. The shares hit a new 52-week low in yesterday's trading and at this point investors should simply stay away. Not a whole lot is going correctly for the company and those are usually situations you want to stay away and not attempt to be a contrarian - especially in a market such as the one we currently find ourselves in.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.