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  • Dollar Will Keep The Fed Very Patient
    Yesterday, 1:15 PM ITA, SPY, VCR 1 Comment

    Summary

    • The FOMC meeting press release still have no certain view on the timing of policy firming.
    • The Fed has however indicated that it is flexible on either side in terms of the time for policy tightening.
    • I believe that a strong dollar is the single biggest factor that will push policy firming towards 3Q15 or in 2016.
    • US equities are likely to remain positive as the policy firming is delayed. Further, strong economic data and liquidity from euro zone QE backs upside view for US stocks.
  • Caterpillar: Maintaining My Bearish Outlook After Results
    Yesterday, 5:35 AM CAT 3 Comments

    Summary

    • Caterpillar will continue to move lower or sideways on bearish revenue and EPS guidance for 2015.
    • If oil prices remain lower through 2015, Caterpillar is likely to revise its guidance on the downside and that can result in further stock decline.
    • Besides the oil price factor, China's weak growth will continue in 2015 and will imply that equipment sales trends remain depressed.
    • A strong dollar is also likely to impact Caterpillar's earnings in 2015.
  • I Prefer FedEx Over UPS For 2015
    Wed, Jan. 28 UPS, FDX 13 Comments

    Summary

    • UPS has reported that it anticipates lower than expected results for 4Q14 and the stock slumped on the news.
    • I expect 2015 to remain challenging for UPS and management has indicated continued margin compression for the year.
    • Operating margin for FedEx has been expanding and will continue to expand in 2015 on the back of a modern fleet.
  • Is $200 Oil Possible?
    Tue, Jan. 27 CPG, REXX, VDE 5 Comments

    Summary

    • OPEC’s secretary-general is of the opinion that oil can surge to $200 per barrel on lack of investment in the oil and gas sector.
    • I believe that even if oil prices trend back to $80 to $100 per barrel, the sector will witness renewed strong investments.
    • Oil can potentially go to $200 per barrel on geo-political tensions or currency devaluation. However, such an extreme scenario is unlikely in the foreseeable future.
    • Oil can surge back to $100 per barrel once economic activity picks up globally. Low per capita consumption of oil in China and India will drive consumption growth.
    • My opinion is to gradually accumulate quality oil and gas stocks for strong returns over a 3-5 year investment horizon.
  • Crescent Point Energy: A Sustainable 9.5% Dividend Yield For 2015
     • Tue, Jan. 27 CPG 3 Comments

    Summary

    • Crescent Energy provides a dividend yield of 9.5% for 2015, which is sustainable even in the current energy price environment.
    • The biggest producing assets for Crescent Energy have a low break-even and this makes the company profitable even without considering hedges.
    • A drilling inventory of 7,650 locations provides long-term growth visibility.
    • Internal cash flow can fund 2015 capital expenditures along with dividend payments.
    • The stock bottomed out on December 15, 2014 and has been trending higher. I expect the upside to sustain.
  • Rexx Energy: Worth Considering At Current Levels
     • Fri, Jan. 23 REXX 14 Comments

    Summary

    • Rexx Energy surged by 12.8% after the company provided an update on production, liquidity and hedging for 2015.
    • I expect Rexx Energy to trend higher on a fully funded 2015 investment plan, 33% production growth estimate and a well managed balance sheet.
    • Rexx Energy also has significant long-term potential based on the company's resource potential estimate and the fact that the company has one of the lowest F&D cost.
  • Antero Resources: Robust 2015 Guidance Will Take The Stock Higher
    Thu, Jan. 22 AR 3 Comments

    Summary

    • Antero Resources has provided a production growth guidance of 40% for 2015 amidst a challenging environment in the energy sector.
    • With 94% of estimated natural gas production hedged for 2015, Antero Resources expects an EBITDAX of $1.4 billion in 2015 as compared to an EBITDAX of $1.1 billion in 2014.
    • The company's low-cost assets make the stock an attractive buy even from a long-term perspective.
    • A 70% stake in Antero Midstream Partners is likely to be a long-term value creator. In 2015, Antero Resources is likely to have a cash flow of $100 million from AM.
  • Challenging Environment To Continue For McDonald's
    Thu, Jan. 22 MCD 9 Comments

    Summary

    • McDonald's will post its worst sales performance in 3 decades and the challenging environment is likely to continue for the company in 2015.
    • While McDonald's has embarked on a "seven step plan" to turnaround sales, the impact of the new initiatives remains to be seen.
    • McDonald's growth in other big markets like China remains a big challenge with local players making it big backed by PE funding.
    • Investors can wait for a sustained turnaround in sales growth before considering exposure to the stock.
  • 3 Promising India Focused ETFs
    Thu, Jan. 22 INCO, INXX, SCIF Comment!

    Summary

    • India will overtake China's GDP growth rate in 201 according to IMF and I believe that Indian equities are positioned for a multi-year bull market.
    • Infrastructure is India's biggest challenge as well as the biggest opportunity and I believe that the sector will perform well amidst lower interest rates in the foreseeable future.
    • India's consumption story has just commenced and with very favorable demographics, India's consumption is likely to grow at a robust pace making the consumer related ETF attractive.
    • While the focus has been on large companies in the recent rally in Indian markets, the small companies hold immense long-term potential and the small-cap ETF looks attractive.
  • Preferring Infosys Over Wipro For The Long-Term
    Wed, Jan. 21 INFY, WIT 1 Comment

    Summary

    • Infosys is likely to outperform Wipro over the next 2-3 years on a consistent basis.
    • Inorganic growth and innovation will help Infosys gain an edge over Wipro and also best the industry growth rate.
    • I also expect Infosys to see margin expansion in the next 2-3 years as the company pitches for more innovation driven projects.
    • Investors can consider fresh exposure to Infosys at current levels with the company likely to grow at a robust pace of 15% to 20% in the coming years.
    • Investors alsocan consider switching from Wipro to Infosys as the latter will outperform in terms of stock upside.
  • US And India Remain Bright Spots In IMF Growth Outlook
    Tue, Jan. 20 IBN, INDA, INFY 1 Comment

    Summary

    • IMF has cut global GDP growth forecast by 0.3% since its last outlook. However, the growth forecast for US remains robust amidst gloom for other developed markets.
    • China's GDP growth is likely to trend lower in 2015 and 2016 while India's GDP growth will trend higher. India is likely to beat China's GDP growth by 2016.
    • I remain positive on the US and Indian equity markets for 2015 and I am of the view that India can potentially be the best performing equity market in 2015.
  • Why Large Scale Bond Purchase By ECB Is Inevitable
    Tue, Jan. 20 SPY, USDU, UUP Comment!

    Summary

    • A large scale bond purchase program seems inevitable due to the big debt refinancing wall for PIIGS in 2015.
    • The deflation and weak GDP growth factor also support the stimulus view. Chief Economist at Markit expects 4Q14 Euro-zone GDP growth at 0.1%.
    • The dollar will continue to rally along with strength in US Treasuries. Among risky asset classes US equities will move higher back by liquidity support.
  • More Pain In Store For China Equities
    Tue, Jan. 20 GXC, MCHI, SPY 8 Comments

    Summary

    • China's index has plunged after big trading firms were banned from margin-trading and I believe that this is a beginning of a renewed downside for China equities.
    • The unintended consequences of easy money has been an abnormal rise in Chinese equities amidst negative economic sentiments and policymakers are looking to arrest this rise.
    • Economic indicators point to continued gloom and equity markets are likely to correct based on the economic direction.
    • My view is to avoid ETFs that have large exposure to the financial sector, industrial sector and the real-estate sector.
  • Diamond Offshore Fleet Status Report Has Significant Concerns
    Tue, Jan. 20 DO 8 Comments

    Summary

    • Diamond Offshore's latest fleet status has some major concerns and I maintain my bearish view on the stock.
    • Diamond Offshore's contracts with Petroleos Mexicanos have a high probability of cancellation as the latter embarks on cost cutting due to big losses.
    • The company's North Sea rigs are also under threat of low utilization and potential contract cancellations as lower oil prices force significant cost cutting measures.
  • Implications Of Accelerating Decline In U.S. Rig Count
    Sun, Jan. 18 CHK, ECA, HP 5 Comments

    Summary

    • US rig count slumped by 74 rigs for the week ended January 16, 2015 and I expect the decline in rig count to continue.
    • While some US oil and gas companies will remain profitable at $50 per barrel oil, the incentive to increase production or investment is low from an EBITDA margin perspective.
    • Onshore drilling rig suppliers will continue to suffer in the coming quarters due to lower rig utilization and lower day rates.
    • US consumer sentiment has hit a 11-year high and robust economic resilience implies a strong dollar that is also negative for oil.
  • Barrick Gold: An Interesting Pick For The Second Half Of 2015
    Sat, Jan. 17 ABX 10 Comments

    Summary

    • Barrick Gold, with strong fundamentals, a prudent financial strategy and a low all-in sustaining cost, is an attractive stock to consider.
    • A liquidity position of $6.7 billion gives the company strong financial flexibility for investment-driven growth when gold prices resume an uptrend.
    • Barrick Gold is positioned to generate approximately $5 billion in annual operating cash flows if gold does move higher by 30% from current levels.
    • The stock is worth accumulating at current levels, and accumulation can be accelerated toward the second half of 2015.
  • Transocean Fleet Update Has Nothing Exciting To Offer
    Sat, Jan. 17 RIG 33 Comments

    Summary

    • I expect downside for Transocean to continue with the latest fleet status update having no positives to offer.
    • The latest fleet report shows an increasing number of rigs going idle, cold stacked or classified as "asset held for sale".
    • I expect oil prices to remain around current levels in 1H15 and this will make re-contracting of several rigs in 1H15 difficult.
    • I expect Transocean's credit metrics to worsen in the coming quarters on idle rigs, lower day rate, EBITDA margin compression, lower cash flows and a $1.3 billion 2015 Capex.
  • Tourmaline Oil: Strong Fundamentals And Growth Prospects
    Fri, Jan. 16 TRMLF 7 Comments

    Summary

    • Tourmaline Oil has been among the few stocks that have shown resilience amid the carnage in oil and gas stocks.
    • The strong stock price resilience comes from strong fundamentals, strong outlook for 2015, and continued decline in operating and G&A cost.
    • Even with any further decline in capital expenditure in 2015, Tourmaline Oil is well positioned to register 40% production growth as compared to 2015.
    • Strong fundamentals and low debt gives Tourmaline Oil plenty of financial flexibility for big investments once energy prices post a sustained recovery.
  • Is Marc Faber Right On A 30% Rally For Gold?
    Thu, Jan. 15 ABX, GLD, NEM 9 Comments

    Summary

    • Gold is unlikely to rally in the first half of 2015 and the outlook for the second half of 2015 is still murky.
    • Only QE4 can trigger a 30% or higher rally in gold and I don't see that coming in the next 2 quarters.
    • The dollar will remain strong in the coming 2 quarters and this will keep gold sideways or lower.
    • My view is to gradually accumulate gold towards the second half of 2015. Gold mining companies also look interesting for 2H15.
  • Surprise Interest Rate Cut To Take Indian Markets Higher
    Thu, Jan. 15 IBN, INDY, SMIN Comment!

    Summary

    • The Indian central bank has cut the repo rate by 25 basis points and I believe that this is the beginning of a series of interest rate cuts for 2015.
    • Lower oil prices, a weak global economy and the 2015-16 budget are triggers for a likely 75-100 basis points cut in interest rates before 2016.
    • The financial sector stocks are likely to rally along with all interest rate sensitive sectors such as real estate and the infrastructure sector.
    • Investors can consider the broad index even at current levels and I expect another 15% to 20% index returns in 2015.
  • Atwood Mako Contract Strengthens Atwood's 2015 Outlook
    Wed, Jan. 14 ATW 5 Comments

    Summary

    • Atwood Oceanics secured a contract for the Atwood Mako jack-up that boosts the company's FY15 contract coverage and revenue visibility.
    • The contract is likely to add $11 million to the company's revenue for the firm period. On contract extension, the revenue contribution can be $30 to $35 million for FY15.
    • I expect the company's 1H15 results to be largely in line with 2H14, and no significant decline in revenue makes Atwood Oceanics attractive.
    • Contracts for Atwood Hunter and Atwood Admiral can trigger upside for the stock as they would change the FY15 and FY16 outlook.
    • Even with the positives, investors need to consider small exposure to the stock as sustained lower oil prices can translate into potential offshore contract cancellations.
  • Three Reasons To Avoid Patterson-UTI Energy
    Tue, Jan. 13 PTEN 4 Comments

    Summary

    • The rig count in US has just started to slump and the implications are negative for onshore drillers like Patterson-UTI Energy.
    • Of 208 operating rigs as of December 2014, only 93 have term-contracts in 2015. The implication is idle time, low utilization and lower revenue.
    • EBITDA compression started in the third quarter of 2014 and is likely to continue over the next 2-3 quarters.
    • Goldman Sachs is forecasting $40 per barrel oil and there can be more bearish times ahead for the sector.
  • Treasuries Rally Backed By Global Economic Slowdown
    Tue, Jan. 13 SPY, VGLT, VGSH 1 Comment

    Summary

    • US Treasuries have rallied in the recent past and the rally will continue over the next 1-2 quarters.
    • Global economic slowdown at a time when the US economy is showing strong resilience is driving liquidity into Treasuries.
    • I also remain positive on US equities for the same reason and my view is to buy equities on any weakness in the markets.
  • Seaspan Corporation Is An Attractive Dividend Stock
    Tue, Jan. 13 SSW 9 Comments

    Summary

    • Seaspan Corporation has a current dividend payout of $1.38 and a dividend yield of 7.7%, which is sustainable in 2015.
    • Seaspan Corporation has chartered out containerships on long-term contracts ensuring steady cash flow in the coming years.
    • Delivery of 8 containerships in 2015 and 4 containerships in 2016 will add to the company's growth momentum and a likely dividend increase.
    • Seaspan Corporation has strong credit metrics that would allow debt financing of the new vessels to be delivered in 2015 and 2016.
  • Innovation And Acquisitions Will Drive Growth For Infosys
    Sat, Jan. 10 INFY 1 Comment

    Summary

    • Infosys has reported strong 3Q15 results and my outlook on the stock remains positive.
    • The company has expanded its "Innovation Fund" to $500 million. The objective is to acquire new technology companies.
    • CEO Vishal Sikka will soon outline the $5.5 billion cash utilization road map and I expect acquisitions and special dividends.
    • Euro-area growth is one concern over the next 1-2 quarters.
  • Encana: Expect 20% To 30% Downward Revision To 2015 Capex
    Sat, Jan. 10 ECA 12 Comments

    Summary

    • Encana has guided for $2.7 to $2.9 billion in capital investments in 2015. With lower oil prices, I expect a significant decline in spending.
    • Encana is largely unhedged, but profitable at $50 per barrel oil. However, lower cash flows would mean lower investments as Encana plans no debt addition in 2015.
    • I expect OCF in the range of $1.5 to $1.6 billion at $50 per barrel oil. The company's guidance of $2.5 to $2.7 billion OCF was at $70 oil.
  • Reasons To Avoid Gulfmark Offshore
    Fri, Jan. 9 GLF 6 Comments

    Summary

    • The break-even oil price for offshore drillers is significantly higher and I expect a very sluggish 2015 offshore activity as oil trades below $50 per barrel.
    • Gulfmark Offshore derived 44% of TTM revenue from North Sea, one of the most expensive offshore basins. Lower oil prices will significantly high activity in North Sea.
    • Gulfmark Offshore derived 42% of TTM revenue from US GOM where rig utilization is gradually declining and if oil price sustains at current levels, utilization will decline further.
    • As of 3Q14, the company had an overall contract coverage of just 26% for 2015. I expect contract coverage to remain weak and significantly impact revenue and EBITDA.
  • Key Takeaways From The Employment Report
    Fri, Jan. 9 SPY, WMT, XLP 1 Comment

    Summary

    • Overall, the employment report for December 2014 remains positive, with few spots of concern.
    • Decline in headline unemployment, coupled with a decline in the U6 rate is a positive, while wage growth remains the key concern, along with an increase in people not in the labor force.
    • Healthcare sector jobs growth remains robust, and it is a good defensive sector for exposure in 2015.
    • The impact of lower oil prices on resource industry employment needs to be closely watched in the coming months.
  • Helmerich & Payne: Good Stock, But Remain On Sidelines
    Fri, Jan. 9 HP 3 Comments

    Summary

    • Helmerich & Payne is likely to trend lower as oil prices plunge below $50 per barrel, which increases the probability of accelerated rig count decline in US.
    • Helmerich & Payne has 114 rigs in spot market and I expect lower day rates for these rigs along with lower utilization.
    • The company has sound fundamentals, modern rig and a high dividend payout that makes it worth considering when onshore market conditions stabilize.
  • First Half Of 2015 Outlook For Oil And Investment Implications
    Fri, Jan. 9 CHK, FRO, OXY 6 Comments

    Summary

    • Crude oil is likely to remain at current levels in the first half of 2015 as global oil inventory surges.
    • A sharp global economic slowdown can translate into extended gloom for oil prices.
    • Investors can gradually accumulate attractive oil and gas stocks, as the sector is not surging higher anytime soon.
    • Offshore drillers can be avoided in the first half of 2015 as offshore drilling activity will be very weak.
    • Exposure to oil tanker companies can provide stellar returns over the next few quarters.
  • Caterpillar Has More Downside
    Thu, Jan. 8 CAT 7 Comments

    Summary

    • Caterpillar has declined by 12.5% since my bearish view on the stock on December 5, 2014 and I expect the downside to continue.
    • Lower sales to the oil and gas sector will impact the company's outlook for 2015 and I expect the company to release a bearish guidance for the year.
    • The China slowdown factor will continue to impact the resource industry sales for 2015 and it is likely that Caterpillar reports lower 2015 sales as compared to 2014.
    • Expect the next significant downside when the company releases its 4Q14 results on January 27, 2015.
  • Cenovus Energy - Resilient Amid Carnage In Sector
    Wed, Jan. 7 CVE 5 Comments

    Summary

    • Cenovus Energy is worth accumulating at current levels with a 3- to 5-year investment horizon.
    • The company's 2015 capital investment plan remains robust and the company also plans to maintain current levels of dividend.
    • Capital investment and dividend payment through internal cash flows will ensure that leverage remains stable in difficult times.
    • Considering internal cash flows and undrawn credit facility, Cenovus Energy is fully funded for the next three years.
    • Big ticket projects will created sustained value once oil prices recover.