We have more economic news today which has the potential to move markets strongly. We purchased more exposure to the Utica yesterday, increasing our stake in Gulfport, but that is but a side not this morning as there were far more interesting trades yesterday and those are the companies we want to focus on this morning.
Oil & Natural Gas
We watched yesterday as shares in Kodiak Oil & Gas (KOG) continually bounced off of the $8.80 area to move higher into the $8.90 range, and only at the end of the day did we finally get to see shares test the $9.00/share level. The stock closed at the high of the day after shares rose $0.19 (2.16%) to close at $9/share, so investors will have to wait another day to see if shares can move through this resistance. We like that the intraday chart looked so strong yesterday, however there was very light volume on the move with only 3.5 million shares traded.
Magnum Hunter Resources (MHR) is a company which we have discussed before as they have some acreage in some of the shale plays which we follow, namely in Ohio's Utica Shale. The company's shares rose $0.23 (5.68%) to close at $4.28/share, which was just off of its highs for the day. There was no company specific news here, but we did notice a few of the smaller E&P plays rise strongly yesterday in what was a mixed day for the industry. This is not one of our favorite plays, however we are bullish all things Utica so we cannot dislike the company. We would recommend sticking to some of the other names in the Utica we have mentioned.
Coal stocks too were mixed yesterday with Walter Energy (WLT) rising $0.86 (2.39%) to close at $36.79/share after a tweet by Doug Kass speculated that the company may be a takeover target, as reported by Wall Street Cheat Sheet throughout the day. His theory is that Xstrata would be a willing buyer at prices about 20-30% higher. We think that it is a bit of a stretch at this point, but do recognize that it is becoming apparent that there is some type of value within the industry at these levels, it is just a matter of price discovery and what one is willing to pay for the assets.
Alpha Natural Resources (ANR) moved in the opposite direction of Walter yesterday and was one of the leading decliners in the industry. Shares fell $0.23 (3.36%) to close at $6.61/share on volume of 19.7 million shares. With shares trending lower a bit over the past few days it will be important to watch the shares and make sure that the stock does not break lower once again, which looks possible. We want to go bullish here, but the chart just does not justify it yet, thus our willingness to wait.
Management's skepticism about earnings finally materialized in the numbers this quarter at Deere (DE) and shares fell $5.03 (6.28%) to close at $75.10/share on volume of 18.9 million shares. Earnings rose, as did revenues, but both lagged expectations. The company cut its revenue guidance for the whole year after the quarter and that is what really spooked the market. Farmers are still buying equipment and the company continues to grow at a double digit clip, but the rate of growth is admittedly slowing which in the past has signaled weaker times ahead. If the European and Chinese markets do not turn around soon, the company will probably have a tough road ahead - especially if the North American market sputters at all.