We saw the commodity complex hammered again yesterday with Utica shares selling off into the close. It sure looks like patient investors with long-term outlooks are going to get an opportunity to add to core positions at discount prices. That is how the big money is made, trading around your core position that is, and we are going to take this pullback as an opportunity to add a name or two to the retirement portfolio. We will have a few conference calls to listen to this weekend from companies which we follow and will work that into our articles next week.
Oil & Natural Gas
One of the more interesting stories yesterday was SandRidge Energy (SD) where the company was in the news for a myriad of reasons. First a large shareholder, TPG-Axon Capital Management LP which owns a 4.5% stake, sent a letter stating that the company's board needed to be reconfigured and the company needed to replace CEO Tom Ward. Also, the hedge fund believes that the board should explore every avenue to maximize value for shareholders which would include a possible sale of the entire company. Later in the day the company announced results which beat analysts' estimates by $0.05/share and announced that they were exploring a sale of the Permian Basin assets not associated with their trust there. The proceeds of the sale would be used to reduce debt and fund exploration in their Mississippi Lime play in Oklahoma and Kansas. Shares finished the day off of their highs but still up as they closed at $6.10/share after rising $0.10 (1.67%) on volume of 40.5 million shares. Yes it was up stronger earlier, but up is up especially when you are green on a red day.
During market pullbacks many good stocks get pulled down in sympathy and that is what is happening with EOG Resources (EOG) which fell $4.23 (3.53%) to close at $115.77/share on higher than average volume of 2.3 million shares. The company recently reported results which investors cheered and pushed shares up to a new 52-week high. This weakness is to be bought, not sold as this is one of the better investments in one of the best plays with a great management team in place.
Freeport-McMoRan (FCX) finished the day at $38.67/share and finished at $0.62 (1.58%) on volume of 13 million shares. We told readers to sell shares we had recommended buying in the $40s, and now we are looking at a new entry point here. We are discussing a possible trade, not a long-term investment at this time and we believe that the $38/share level could provide a nice entry point, but we want to make sure that shares do not move below that level. Should they, the next level where we would be buyers would be around the $36/share area. We will keep readers updated, but these are our thoughts on Freeport right now and if you see a buying opportunity during a trading session go for it, just make sure that the move is confirmed.
We were happy having recommended covering any short/bearish positions over the past few days for Molycorp (MCP) even though it set a new 52-week low yesterday. The reason is because after the bell the company reported earnings which beat on the bottom line and the stock was up roughly 6% in after hours trading. This will be a play we come back to in the future, but the easy money was made and the proper call was to take profits and protect what readers had earned in what has been a down market. For those wanting to continue to follow this one, it may be wise to follow what China and Lynas are doing rather than focusing with tunnel vision upon the actions of Molycorp itself.
The coal complex continues to come under pressure with Alpha Natural Resources (ANR) falling another $0.30 (3.55%) to close at $8.15/share with volume registering at 19.2 million shares. We expect coal shares to settle down and probably retrace a bit more after the huge rally that occurred prior to elections. We have been getting many emails lately with readers thinking that we are permanently bearish on coal stocks, which is simply not the case. We timed our sequence trades wrong with activity in the Utica taking a bit longer than anticipated as wells have to sit longer than previously thought. That has delayed us by a year now which has caused us to stick with our positions there and unwilling to take on debt to fund our excursion into coal due to market conditions. We properly called the bottom when we stated where we thought many of these names were headed and will at some point move into the shares when we think they have settled down. Also, we do not think that Obama is going to put the coal companies out of business as they always can export to other markets, but his administration will undoubtedly make it harder to operate and certainly not easier.