Energy, Energy Service, Natural Gas &amp; Oil Sectors

Top 8. Feb 27, 1999 10:33 AM

» Hugs - Can the OS sector work as a hedge?

Agreed that as a solitare play, the OS sector certainly doesn't look to have the favorable risk/reward offered elsewhere. But what if political unrest (or dare it even be thought... OPEC agreement and compliance, perhaps even by some non-OPEC oils such as Russia) results in even modestly higher crude (mid to higher teens.) What effect does that have on the overall market? The internuts dance to their own music and seem to ignore everything, but doess the rest of the market get pulled down by higher energy prices? The next question if that is true, then does the oil service sector get pulled lower as well, or is this a "hedge" bet against higher oil? There is already a call for higher natural gas.

Not a hawk, but I do believe the middle east will always be an arena of political unrest. Wouldn't the OS equities be a reasonable safety net against an unknown failure there?

-- posted by Hugs

Top 9. Feb 27, 1999 2:22 PM

» RandeS - It's always gratifying to have a post "ratified" after the fact

It's always gratifying to have a post "ratified" after the fact by BB's on-air comments. Today, BB so much as said to a caller worried about runup in oil prices due to emerging market recovery -- "Don't hold your breath!" As BB said, the recovery has to even START, before we can worry about the extent. As for Mid-East unrest -- it's always there and always has been. I've never believed in making long-term investment decisions on "best-case/worst-case" hypothecticals. If the Mid-East erupts in truly serious conflict (nuclear, etc.), then worry about investments will be secondary to survival.

-- posted by RandeS

Top 10. Feb 27, 1999 2:32 PM

» RandeS - BTW, if you own the Total Stock Market fund and have internation

BTW, if you own the Total Stock Market fund and have international diversification, then you're bound to have participation in oil producers and service providers to some extent -- why overweight in the absence of certainty (which is always the case).

-- posted by RandeS

Top 11. Feb 28, 1999 9:55 AM

» Gene - Energy Prices / Stocks - Part 2

Wow - I posted a little blurb about "looking at some energy stocks" and it triggered all those interesting posts! My wife and I left at 6:00 AM Saturday to go winter hiking in New Hampshire and I did not see all of them until this morning. I must admit, I enjoyed folks expressing their opinions as the posts went on without having to defend or explain!

Here is the deal - I have belonged to an investment club at my "former work" place for the last 3 years. The purpose was to educate myself about individual stocks and do some investing in stocks during retirement. The NAIC charted club has been in existence for 35 years, I am on the sell committee and participate in all the bi-weekly investment activities. We follow a very rigorous NAIC analysis and S/W process, use Value Line extensively and all must vote to buy or sell a stock. Value Line this week had several sections on the Energy field sectors and their stocks. My job is to update the data files and work with the other members on any sells or buys if we think it is such. I also look at them for my own portfolio, a good test if I am willing to invest my money.

Key investment point - we do very well buying when a sector has been busted - the John Templeton motto "Buy when there is blood in the streets." Of course, we look at the business fundamentals, will vote NOT to buy if too soon but many times will vote to put it on follow up for when the timing might be better if we are interested in owning the stock. Some club examples are WCOM bought at split adjusted $10 in our portfolio, Biomet at $13, Novellus at $20 etc.

Simply put - after the data updates,(we currently own Transocean), we will go through the process to see if the time is right to buy a top of line company (say Schlumberger, Diamond Offshore, Petro Geo, Transocean etc,) at bargain prices because of the turmoil and the entire club will vote on it. The goal for myself is to build a stock portfolio of solid companies bought at good prices. I bought WCOM at $44 last year after such club analysis but more as a technology momentum play.

Lastly, this sector because of its importance, certainly keeps one looking at the Global economic factors as well as political issues.

Gene

-- posted by Gene

Top 12. Mar 1, 1999 6:01 AM

» RandeS - Gene,

Gene,

Value-oriented strategy can work well, but only with superhuman patience at times. Templeton's approach has killed that firm's international fund, given their philosophy that the Rim and Latin America are the best "values," even though most other international managers have pragmatically overweighted Europe.

The problem with buying down-and-outers is they sometimes stay that way for a long, long time (as Keynes said, "In the long run we're all dead). A value approach to Japan would have been worse than dead money this past decade, for example. As for oil, would have to see some reason to believe a turnaround might take place in the forseeable future. Just isn't there. Would much rather miss the first few percentage points when the time seemed ripe than be overly early. Guess that's the beauty of the Total Market Index and a diversified international position -- don't have to worry about when any one sector will do well or not.

-- posted by RandeS

Top 13. Mar 1, 1999 5:01 PM

» Gene - Energy Part #3

Rande:

Of course bad companies can stay that way and to reach full value there is needed a catalyst. But to pick a similar example, wouldn't you agree that US Banks back in late 80's and early 90's were given up for dead? The Japanese money centers dominated the top 25 banks and were thought to be invincible back then.

We picked thru that rubble and picked up Bank of Boston for $5 (split adjusted), sold much too early to our chagrin for a missed ten bagger. And you couldn't get folks to buy IBM at $20 (split adjusted) in 1993 after all their disappointments. Of course hindsight is wonderful but hope always springs eternal in the wallet of the investor!

Also, I used Templeton's saying for why one may invest in companies when it is the darkest. I am "not mandated" to stay invested as his funds are nor do I have to follow a style purity to satisfy some investors. The beauty about looking at this group and a couple of other "busted sectors" is one can be patient, take their time doing the analysis and establish fair prices, catalysts etc.

Anyway, this "conversation is good" as this site is a lot more investing savy than others and folks can think for themselves and wade through the discussions. FWIW, I have a solid position in Total Stock Market and I'm "playing" with 5% of my Rollover in all this individual stock work.

Gene

-- posted by Gene

Top 14. Mar 10, 1999 7:27 AM

» Hugs - Higher crude oil.

It looks like crude futures are starting to price in the possibility of OPEC and non-OPEC additional cuts. Of course, whether agreements are followed is an issue.

If crude remains in the range of $ 14-16, how much drag will this have (if any) on the overall U.S. and Asian economies?

IF cuts are "somewhat" followed (nobody cheat? Be reasonable...) where does that put crude prices? Higher, probably.

-- posted by Hugs

Top 15. Mar 12, 1999 1:49 PM

» Hugs - oil rally for real?

It's always gratifying to have a post "ratified" after the fact by what actually happens. (gotta take a jab at ya Rande, you deserved that one...)

My severly beaten OS pupy has crawled out of the gutter this week...(after jumping up 75% from its lows two weeks ago on heavy volume, I "lightened" the load by 10% yesterday.) It has settled back to 50% off the lows, and is now slightly under my "buy in" price. Is this the start of the oil bull? Who knows? The stock is still down 75% from it's 52 week high (yep, this one had been crushed.) That's a quadruple from where it sits right now.

Hold 'em till after the OPEC meeting, or sell more into the next wave of strength? What to do next? Still long plenty, but it looks like there's some more easy upside to it next week.

Who thinks this oil rally has legs? (my puppy needs them...)

-- posted by Hugs

Top 16. Mar 12, 1999 2:47 PM

» RandeS - hugs,

hugs,

You're right, and in fact I was the first to jab myself by admitting I'm "lunching on my words" right now (see previous post at "Ask Rande"). Whether the current rally is good for a few points or not remains to be seen. I see couple of problems that might make this turn out to be a short-lived spike. First, OPEC has a terrbile record of living up to its agreements, to put it nicely. Second, I haven't seen anything written about the impact of higher oil prices on countries such as Brazil and Japan (not to mention the rest of the Pacific Rim) that must import ALL of their oil. These economies are in a state of bad to already far-gone. Europe is facing a slump (all but a few countries having no domestic oil supplies either). So, I guess the question is, "Where is the demand going to come from?" What little demand there is now is going to be hurt by higher prices. Supply is only one side of the equation. Anyway, would expect my earlier views on current world-wide glut continuation, anemic demand, and lack of cohesiveness on part of OPEC to be borne in due course. Most importanly, regardless of what happens in any sector, oil or otherwise, I'll stick with my plan to stay diversified by not over or under-weighting any particular sub-asset class to any significant degree.

-- posted by RandeS