I executed a successful bull market put spread on Newfield Exploration (NFX) back in March of this year. That spread expired some months back and the stock looks like an outright purchase now that has fallen to just over $30 a share. The company has had some recent positive catalysts and the stock is cheap on a valuation basis. I will be looking to either pick up the shares outright or through short term naked puts at $30 on Monday.
Recent positives for Newfield:
- It just successfully disposed of $565mm of non-strategic assets in the Gulf of Mexico to W&T Offshore (WTI).
- Natural gas prices are up some 50% off their lows earlier the year and this should start to show up in the company's bottom line.
- It continues to execute well against a plan to move production from 30% oils & liquids in FY2010 to 48% by the end of FY2012.
Newfield Exploration Company is an independent energy company that produces natural gas, oil and other liquids. Its main properties include acreage in the Rocky Mountains, Mid-Continent, Malaysia and offshore China.
4 additional reasons to buy NFX at just over $30 a share:
- The stock is selling at the bottom of its five year valuation range based on P/B, P/E, P/S and P/CF.
- The twenty analysts that cover the stock have a median price target of $42.25, some 40% above the current stock price.
- Analysts also expect between 7% and 12% revenue growth for FY2012 and FY2013 and the stock has a five year projected PEG of under 1 (.80).
- The stock is cheap at just 96% of book value and three times operating cash flow.