At the end of each trading week, Hillbent scans the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our Market Condition Summary to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

The recent conference call from Atlas Pipeline Partners (APL) gave estimates of distributable cash flow of between $1.90 and $3.65 for the next 4 quarters. Further remarks indicated that pending board approval, distributions could restart in early 2010.

These numbers are based on historic NGL prices in relation to $65 oil. APL has been working to deleverage their balance sheet and it is anticipated that much of the cash flow for the next several quarters will go to pay down debt.

The following press release announces the merger of Atlas Energy Resources (ATN) into Atlas America Inc (ATLS). The new company will be known as Atlas Energy. This merger raises some interesting possibilities and questions. The questions are more of a organizational nature:

• Will the merged company be listed on the NASDAQ or NYSE?
• What happens to the LLC structure and distribution policy of ATN?

The release states that Atlas Energy Resources shareholders will get 1.16 shares of the new Atlas Energy for each share owned. Also, that ATN distributions will be suspended until the merger goes through. ATN historically has paid a distribution right about now so I guess we can kiss that one goodbye.

Bullish Calls:

Bullish Calls:

Disney (DIS): “I don’t think this stock has much downside below $18…At $18, I’m pulling the trigger. It is a good brand name. I wish it had a better dividend. I like the franchise.”
Mastercard (MA), Kinder Morgan Partners (KMP)
Celgene (CELG): “Reported a monster good quarter…very big drug released on Friday... the stock has been stalled here…you’ve got a good one…buy it and put it away.”

There are signs that credit is flowing once again in the beleaguered energy sector and in particular within the Master Limited Partnerships [MLPs]. MarkWest Energy Partners’ (MWE) announcement that it has successfully entered into a new joint venture with NGP Midstream & Resources and expanded its credit facility are tell tale signs that this illiquid corner of the energy sector is seeing a return of financing and investment.

The new joint venture, when coupled with the increase in borrowing capacity, allows MarkWest to realign its capital expenditures to account for projects that it was required to undertake in the second half of the year. In achieving this, a significant overhang has been removed from the stock, as the company will likely not be forced to raise dilutive equity to undertake its obligatory contracts with Newfield Exploration (NFX) and Range Resources (RRC).

Atlas Energy Resources (ATN) has announced the 4th quarter distribution will be 61¢ for shareholders of record on February 9, 2009. The distribution is the same amount as the previous two quarters. Even after yesterday’s price bump the stock is still sporting a yield near 17%.

ATN is well hedged through the rest of 2009 and into early 2010. It is positioned to continue to grow its well numbers and production even at the current low natural gas prices. If past practices hold they should release year end results in a couple of weeks.

In a world where finding investment capital has become a fine art, Atlas Energy Resources (ATN) has shown its ability to do what no other energy company could even dream of undertaking in the current credit environment.

Unlike any of its competitors, Atlas Energy operates a partnership program that allows private investors to participate in its drilling activities, in return for giving up a portion of its drilling rights, the company receives a huge cost advantage and management fees that are highly accretive, in addition to the portion of the drilling interest that it keeps for itself. In using other people's money, Atlas Energy Resources is able to leverage its own capital position to garner projects that it would not otherwise be able to participate in if it were only operating off of its own balance sheet.

I currently have two hypothetical portfolios I track on this site. A few days ago I wrote the year end review of the Income Portfolio. Before we get too far into the new year I wanted to write some notes about the performance of the Opportunities Portfolio.

I started up the actively managed version of this portfolio on October 1, 2008. The portfolio holds stocks that I think have potential for significant returns from all stock picking disciplines: growth, value, international and unique stories. I personally have positions in a significant number of the stocks in the portfolio, but not all of them.

At the end of each trading week, Hillbent scans the market for extremely overbought stocks with a proprietary "E" (weakest) or "D" (next weakest) ranking in terms of negative fundamentals for revenue and earnings stability. The generated result is better known as the "Weekly Dogs With Fleas" watchlist.

Past observations have revealed that such candidates may experience reversal corrections to the downside once the market reconfirms that their fundamentals remain relatively poor.

1. Obama should hold a press conference and declare the government’s commitment to saving financial institutions.
2. To prevent another AIG-style situation, the government should ensure the stability of insurance and annuities.
3. The government should issue tax credits for those buying homes and reform TARP so banks are not penalized for taking aid.
4. Freddie Mac and Fannie Mae’s bonds should be insured so the companies can function
5. Collateralized debt obligations or CDOs should be bought up to stabilize the market
6. The government should finance auto companies that file for bankruptcy.
7. China and Europe should be persuaded to cut interest rates 2%
8. Reforms should take place now, and there should not be a delay until Obama is sworn in.

Clean Energy Fuels has fallen along with the price of oil and on the fact the politicians do not seem to be jumping on the natural gas bandwagon. However, Andrew Littlefair says there is still a reason to be optimistic for the long term. Littlefair thinks the main reason Proposition 10 (which would have encouraged the further development of natural gas) was rejected in California was economic; that voters looked at their empty pocketbooks and simply felt they couldn’t afford it, not that they disliked the idea. While Cramer notes everything is down in this environment, he still thinks Clean Energy Fuels is a winner.

Earlier this week Chesapeake Energy (CHK) announced that the company was proceeding with the sale of a 32.5% interest in its Marcellus Shale development to StatoilHydro (STO), the Norwegian oil giant.  In return for its new interest in one of North America’s more interesting shale plays, StatoilHydro is paying $1.25B plus the guarantee that it will foot 75% of the expected drilling costs through 2012 for an additional $2.13B.  Another Norwegian company, Norse Energy has already built up a sizeable acreage position in the Marcellus Shale totaling somewhere around 175,000 acres. 

Given the interconnectedness of Norway it would not surprise me at all if the executives at Norse Energy and StatoilHydro had at the very least talked over the opportunities that the Marcellus Shale offers to natural gas prospectors.  Nevertheless, the emergence of StatoilHydro as a passive foreign partner should serve as a reassurance to domestic gas produces in search of cash as the Norwegian giant is more likely than not only the beginning of wave of large foreign multinationals looking to diversify their production base via the acquisition of U.S. oil and natural gas producers in relatively low cost venues. 

If one starts digging into the interrelated Atlas energy companies, you first get a headache, then you decide there may be some good profit opportunities. So far I have listened to 2 earning calls from the energy company and the pipeline folks. Atlas America (ATLS), which hold general partner interests and a significant portion of the LP units will report on Friday.

First up was Atlas Energy LLC (ATN). ATN is the natural gas exploration and production part of the equation. Atlas Energy currently is developing shale properties in Michigan, Tennessee, Indiana and the monstrous Marcellus Shale in Pennsylvania. From the 3rd quarter of 2007 revenues were up 19%, earnings up 21% and distributable cash flow up 17%. The company has had 6 straight quarters of record results since going public at the end of 2006. A dividend of 61¢ was declared giving the stock a current yield of 11%. Distribution coverage for the quarter 1.4 times in distributable cash.

Atlas Pipeline Partners (APL) has declared a 3rd quarter dividend of 96¢, matching the 2nd quarter payout. In the two trading days since the announcement the share price has dropped almost 15%.

This has me quite confused. I would understand if the market was pricing the stock at a 7% yield and the price falls because the dividend did not increase, but at $19 APL is yielding 19%. Even more incredible, Atlas Pipeline Holdings (AHD) increased the dividend from 42¢ to 51¢ and that stock is off 20% to yield over 20%.  AHD operates the general partner interest in APL, receives the GP incentives and holds over 5 million units of APL.

Where we are in the cycle. The MLPs have been to hedge funds what money markets are to you and me, a place to deposit cash, only with a much better yield and a fairly predictable and safe one as long as commodity prices are flat or rising. Recently, hedge fund redemptions have pounded the shares. There is actually a MLP index, the Alerian MLP Index, ticker AMZ, which peaked at about 342 in mid July 2008 and hit a low of 151 on October 10 before closing at 220 yesterday. So it's volatile. Look at how the index performed during and following the last few market implosions relative to the S&P500 (the index is blue and the S&P is yellow if you can’t make it out in the chart’s legend):

In an April article ("Upstream MLPs and Canadian Royalty Trusts: High Return, High Risk?"), I wrote:

Lehman Brothers owns substantial stakes in nearly every upstream MLP -- more than 10% in several cases. If circumstances force Lehman to dump those units, it might present great buying opportunities for holders with new money and a long term perspective, but really stressful times for current unitholders." This was sadly prescient. Lehman and hedge funds liquidated these stocks with wild abandon. This has been compounded by the mis-perception that when commodity prices soared, the mark-to-market, paper losses on these companies’ hedges were real losses. A recent AP headline read "EV Energy Partners swings to 2nd-qtr loss on bad hedges.

Todd Sullivan attended this week's Value Investing Congress on behalf of Seeking Alpha.

Leon Cooperman presented on "The Investing Climate and All-Weather Stocks"

Bullish Calls:

Energy Transfer Partners (ETP) -- “I like Enterprise Product Partners better but Energy Transfer Partners is still a good stock.”