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Bret Jensen
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Daily columnist for RealMoney at Editor for both a small cap and turnaround monthly newsletter at Investors Alley ( Chief Investment Strategist (CIS) for S.A.M (Simplified Asset Management), a long/short hedge fund based in Miami, Florida from 2008 to... More
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  • Energy Sector Roundup - 11/19/2013

    The Oil & Gas sector has been one of the most dynamic within the market over the past few years. Domestic energy production has exploded over the last half dozen years and the United States is set to become the world's largest oil producer in 2015.

    A good portion of the major winners in my portfolio as well as myriad topic ideas for my articles on and SeekingAlpha have come from this space over the past few years. I think it is an area that growth and income investors should pay close attention to for possible additions to their portfolios. We are still in the early innings of this energy production expansion in North America and many "winners" will emerge in coming years.

    There is so much going on within the sector it is sometimes hard to keep track of all the significant news in the sector on a daily basis. In an attempt to help investors uncover these opportunities, I am going to produce a new feature called the "Energy Sector Roundup" which I plan to publish on a regular basis. It will highlight major events & announcements within the industry as well as key analyst commentary and ratings changes. I will also profile a possible long idea at the end of each piece.

    Without further ado, here is the Energy Sector Roundup for 11/19/2013.

    Key Analyst Moves & Comments:

    Goldman Sachs goes negative on a couple of oil services plays. The investment bank moves from "Neutral" to "Sell" on Hornbeck Offshore Services (NYSE:HOS) and Netherlands based Franks International (NYSE:FI) and lowers their price targets on each significantly.

    For Hornbeck, the stock has appreciated more than 50% this year. Might be time to ring the bell on this play for the time being especially as consensus earnings estimates have started to come down in the last month for FY2014. Citigroup has a different take on Franks. It just reiterated a "Buy" rating on the shares last week with a $35 price target on the stock. I am neutral on the shares and I think there are better bargains in the space.

    Monday just was not a good day for oil services stocks overall as Global Hunter downgrades myriad names such as Halliburton (NYSE:HAL), Superior Energy (NYSE:SPN), Key Energy (NYSE:KEG), Pioneer Energy (NYSE:PES) and Basic Energy (NYSE:BAS). Global Hunter states investors are too optimistic on cap ex growth and prospects for margins. I still like Halliburton here for reasons I articulated late in October. However, given the nice run over the last six months where most of these names have easily outperform the S&P (See Chart), it might be time to take some profits in the sector.

    (click to enlarge)

    On the brighter side, small E&P concern Gastar Exploration (NYSEMKT:GST) powers higher as Imperial Capital reinstates the stock as an "Outperform" with a $6 a share price target, ~30% above the current stock price.

    Citigroup reiterates its "Buy" rating on energy logistical limited partnership Tesoro Logistics (NYSE:TLLP) and it also raised its price target a buck a share to $60. The company also announced it is doing a secondary offering of 6.3mm new shares to raise proceeds to purchase additional energy terminals & assets. I would use any drop as a good entry point on this 4% plus yielder with exploding revenue growth.

    Major Announcements/Events:

    Oil & Gas Master Limited Partnership QEP Resources (NYSE:QEP) has responded to activist investor Jana Partners recent demands stated it will continue to look for ways to enhance shareholder value. Jana has a 7.5% stake in QEP and wants the company to separate its midstream businesses. Barron's recently published a positive piece calling the shares "attractive". Definitely one to keep an eye one.

    Drilling at the huge offshore discovery off of Israel "Leviathan" is delayed by at least a quarter. Most impacted by delay should be Noble Energy (NYSE:NE) which owns almost 40% of the field. Given the importance to Israel's economy, I expect issues to get resolved in short order; but still a minor negative for Noble until resolution is complete.

    Stock of the day:

    Our stock of the day is Helmerich & Payne (NYSE:HP). The company provides contract drilling services to the oil & gas industry. It supplies drilling rigs, equipment, personnel, and camps on a contract basis to explore for and develop oil and gas from onshore areas and fixed platforms.

    The stock was nicely left out of all the ratings downgrades across the oil services sector on Monday. In fact, Citigroup actually hiked its price target to $89 a share from $82 previously yesterday on Helmerich & Payne. The shares are also up more than 75% since I first profiled the firm in July 2012.

    Helmerich & Payne beat expectations nicely on the top and the bottom line when it reported quarterly results late last week. It was the seventh straight quarter the company has beat the bottom line consensus estimate. The shares are still reasonably valued at just over 13x forward earnings and they also provide a 2.5% dividend yield.

    Disclosure: I am long HAL, HP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: FI, GST, HAL, HOS, HP, NE, QEP, TLLP, long-ideas
    Nov 19 9:02 AM | Link | Comment!
  • Why I Am Still Bullish On Microsoft
    I have been a strong advocate for buying Microsoft MSFT for nine months. The company is coming off twelve years where the stock did nothing despite consistently rising revenues and earnings throughout that time span. I think MSFT is starting to break out of that decade long slumber and its recent earnings report reinforced that stance.
    Key highlights from Microsoft's earnings report:
    1. Its Server & Tools Division generated $2B in net income, up 17% year over year.
    2. Microsoft's Entertainment division lead by Xbox had net income that rose 15%.
    3. The company also was hit less by the PC slowdown that analysts had penciled in and its online division continue to narrow its losses.
    4 reasons to continue to buy Microsoft at $29:
    · Its first phone with Nokia NOK is generating largely positive reviews and new models will follow shortly. In addition, Windows 8 is on track to be released late in 2012.
    · Microsoft provides safety with an AAA rated balance sheet and a 2.8% dividend yield. It also has almost $5 a share in net cash on the books.
    · Microsoft still sells near the bottom of its five year valuation range based on P/E, P/B, P/CF and P/S. It sells for about 7.5 forward earnings if you take net cash out of the equation.
    · Based on this earnings reports, I would look for analysts to raise their price targets and/or their rating on the stock. Credit Suisse has an "outperform" rating and a $34 price target on MSFT.

    Disclosure: I am long MSFT.

    Tags: NOK, MSFT, long-ideas
    Jan 20 2:38 PM | Link | Comment!
  • 10 disconcerting signs from the first two days of the trading week
    Reality hit the market on Monday and Tuesday as events in Europe and the aftermath of the dismal jobs report on Friday. The S&P and NASDAQ both have lost more than 2% so far this week. Given the disappointing earnings reports after hours, the rest of the week is not lining up well. Here are 10 negative items from the first two days of the week that are likely to affect trading Tuesday and the week ahead.
    1.       The market has finally woke up over the past two days to the fact that the European debt crisis might extend past Greece, Ireland and Portugal. The last few months have reminded me of the scene in Monty Python and The Holy Grail when John Cleese is running across a meadow in full charge. Two guards at the castle are watching this for what seems like an eternity. The charging knight always seems a thousand yards off in the distance until he is fully upon the guards. It seems the problems in Italy were out there for months for anyone to see, it’s hard to fathom the market being so surprised by the obvious.
    2.       If that wasn’t bad enough, Spain’s problems are even more problematic than what the market is pricing in.
    3.       Bank of America concerned the market that it may need to raise additional equity due to settlements and losses which was one of the drivers of the financial sector losing over 2.7% Monday.
    4.       Debt ceiling talks are stalling as both parties have painted themselves into the corner. This could have a disruptive impact on the market if not resolved in the next ten days.
    5.       Investment banks are expected to report revenues are down 25% in the quarter which speaks to weakness of the overall credit and underwriting markets and will lead to further job losses among their well heeled
    6.       Rail car traffic showed anemic growth in June. Not exactly the harbinger of robust economic growth.
    7.       Doug Kass came out Monday and advised to sell stocks as investor opinion is much too bullish and the risk/reward is not favorable.
    8.       Good story in the Times Monday on the headwinds from the expiration of government support hits the unemployed and other vulnerable segments of society, which will impact consumer spending.
    9.       The latest small business survey shows little new hiring plans. Given small businesses provide the majority of new jobs, this does bode well for job growth for the rest of the year.
    10.   After hours, on Monday earnings guidance from Novellus and Microchip Technology were disapointing that led to major losses for both stocks on Tuesday. Electronic Arts purchase of PopTops is likely to depress that technology stock on Wednesday.

    Be Careful out there.  The summer is going to be a roller coaster

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jul 11 10:33 PM | Link | 1 Comment
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