I executed a successful bull market put spread on Newfield Exploration (NYSE: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 (NYSE: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.