Mad Hedge Fund Trader's  Instablog

Last January I said that I felt like a kid in a candy store when I looked at the oil service stocks ( http://www.madhedgefundtrader.com/January_12__2009.html and  http://www.madhedgefundtrader.com/January_13__2009.html  ). Let’s see how those worked out.  Flowserve (FLS) is a global supplier of pumps, valves, seals, automation, and services to the power, oil, gas, and chemical industries, and seemed like the deal of the century at a PE multiple of 7X. It has since soared by 88% from $45 to $85. Buying Patterson-UTI Energy (PTEN) at a 5X multiple seemed like a better idea because it operates 403 rigs for oil and gas drilling in the Midwest.  It has exploded 125% from $7 to $16. Subsequent recommendations to buy Kinder Morgan Energy Partners (KMP) and Enterprise Products Partners (EPD) did just as well. As much as I love these companies, you have to take some money off of the table after such humongous moves. The entire sector tracked the up move in crude very nicely, dollar for dollar. If I am the least bit right to take profits in long positions in crude, as I mentioned in yesterday’s comment, you have got to cash in some chips in the oil service sector as well. I have always been a big fan of taking the easy money, and the easy money has been made. Long term, these are great holds, but short term, they’ve run ahead of themselves. Make the volatility work for you. Remember, you are dating these companies, not marrying them.