It was a tough day yesterday in the market for those industries that would have benefited from a Romney victory. We were lucky to exercise caution and stay on the sidelines to see how things would shake out and we effectively lived to fight another day. We are striving to thrive in the next four years, not necessarily because of the current administration but possibly in spite of it. We think Washington is going to get the fiscal cliff solved and the animal spirits of America's entrepreneurs are going to come out as we see green sprouts begin to become visible.
Oil & Natural Gas
Investors will get earnings from SandRidge Energy (SD) today and it could not come at a better time. The shares are at an important area, $6/share, after falling $0.25 (4.0%) in yesterday's trading. It appears that we are setting up for a move here, and it shall move in a significant way either higher or lower based upon the earnings report in our opinion. Breaking the $6/share threshold for any period of time would certainly not be bullish but right now the shares themselves are not acting bullish as they trend down towards the 52-week low. Analysts will be focusing upon the capital expenditures on infrastructure and rig times which are important but we think that the company's insight into their extension property will be key along with their reaffirming their target for cash-flow self-sufficiency (which we would assume they will do whether asked or not).
Quicksilver (KWK) saw shares get hit yesterday and set a new 52-week low. Shares finished the day at $3.04 and down only $0.32 (9.52%) after rallying back a bit later in the day. We highlighted this one yesterday and stick by our comments but for the record this is not one for the faint of heart, nor should it be a cornerstone of a retirement portfolio. This is merely a spec play on natural gas prices rising, if one is looking for a legitimate E&P play for long-term prospects in a cheap natural gas market here in North America then we would refer you to our older articles to see some of the names we like in that environment.
After Wall Street's surprise in the fact of Obama's victory and Romney's loss many industries responded accordingly and coal was one of the big movers as the entire industry corrected to reflect the uncertainty of four more years of an EPA and administration tightening regulations on their business.
The biggest loser on our screen was James River Coal Company (JRCC) which is one of the more levered names and one which had risen sharply over the past few months. Shares fell $1.41 (30.00%) to close at $3.29/share in yesterday's trading. Volume spiked to 10.4 million shares on the volatility and this has to be one of the names which concerns investors the most. They are one of those names with the least attractive assets as they are low margin and generally work bull markets and not so much during downturns in the industry. The stock outpaced the industry on the way up, and it shall lead the way lower as we correct.
One of the companies on our shopping list is Peabody Energy (BTU) and luckily we were cautious about a Romney victory and wanted to wait until after the election before beginning our buying program. The shares finished down $2.80 (9.64%) to close at $26.24/share as volume rose to 21.9 million shares. It seems like a decent entry point but now we want to get a feel for where the shares are going to settle down at. We like the stock due to their diversified production base and exposure to international markets, which is a benefit many of the company's peers do not necessarily share.
Also of interest to readers would be Alpha Natural Resources (ANR) which saw shares get a 12% haircut in yesterday's session after closing at $8.45/share with volume of 34.9 million shares. It is not one of the blue chip coal companies we are focusing our attention upon for our initial purchases, but it is one which we feel we will eventually own in one of the portfolios.