We were impressed with the debate last night and think that if the challenger does manage to turn his campaign around and make this a serious race, the market could be better off. It is obvious that a Republican in the White House would be better for commodities, so should Governor Romney's campaign build momentum, we would expect commodities to rise in conjunction. Just another wrinkle in what we must look at in order to gauge potential rewarding commodity investments, but we would look forward to the day when getting a mine approved was not a political process but a sound business one based on regulations.
Oil & Natural Gas
After last night's debate we feel that "fracking" and all the companies which benefit from the technology and process of getting oil, NGLs and natural gas from shale rock shall continue to operate unhindered. We did not hear anything about that concerning this sector, rather the tax benefits the companies receive were highlighted and if you have to lose the right to something investors would much rather it be tax breaks instead of a proven process for increasing production and creating vast amounts of wealth. With all that said, we would continue to invest in Chesapeake Energy (CHK) and Gulfport Energy (GPOR) as we believe the boom in Ohio will come to the forefront in the next few weeks as that is an important swing state which is in dire need of jobs. The parallel needs to be drawn between the potential in the Utica and that of the successes in the Bakken and Eagle Ford (remember North Dakota and Texas have some of the lowest unemployment rates in the nation with great paying jobs still being created via the shale drilling boom).
Speaking of Chesapeake, they have filed a lawsuit against Gastar Exploration (GST) over a mistake made at one of their projects. Gastar came under pressure yesterday, and shares fell $0.42 (25.15%) to close at $1.25/share on volume of 2.8 million shares. For those wanting to buy on this weakness, we would advise caution as we have seen many small explorers put out of business with frivolous lawsuits (not to insinuate that this case is, just that we have seen bigger companies use the court system to bleed competitors and partners alike of their cash reserves).
For those looking for an oil and gas E&P play which looks primed for a move, look no further than SandRidge Energy (SD) which finds itself at $7.00/share after falling at $0.05 (0.71%) on volume of 8.9 million shares yesterday. The company finds itself at the $7/share level which has been a point of support and resistance in the past. We feel that a move is coming and that investors should be prepared to jump on the trade no matter which way it goes. A 2-5% move is what we would expect, but a 10% move could be possible as well if volatility really picks up in the market.
Our belief is that it is always a good day to sell solar, but after Romney pointed out the egregiousness of the current administration's loans and grants to the solar and wind industries, we have to believe that some will begin to ask questions about why that money was given out. We do not want to hold shares in any solar companies, but we would most certainly not want to be First Solar (FSLR) shareholders during a Romney presidency after listening to him last night. Anyone who says differently is obviously not looking at the evidence before them, so we are interested in seeing how the shares perform today.
Disclosure: I am long GPOR.