Wednesday, November 28, 2007

Energy and Miners

The beefers are rotating out of the energy and miner groups, creating the potential for good entries for long term buys. I've followed these groups for years and have seen this game played out several time. As long at Asia demand is strong these groups will outperform long term [in my humble opinion].

If you don't own any of these and are a long term investor, I suggest watching them over the next few weeks or couple of months. There is a some seasonal basis for the pullback, too. No rush to buy - the stocks usually bounce around a bottom awhile building a base for the next leg up. I already own a lot of them, so likely won't buy them this time around. I might trade some through options.

Here are my positions in energies and miners.

Oil Sands: SU
Pure Gas; CHK
Deep Water Drillers: RIG, GSF [these two are merging soon], DO, NE
Refiners: VLO [HES and MRO have refining, too, as do the big integrated oils]
Oil Service: NOV
Uranium: CCJ

CVX and DVN have really good properties in the deep water Gulf of Mexico, so have great prospects for substantial adds to reserves. The deep water drillers have great long term prospects as that is the only place that really large oil finds are likely to be made.

Gasoline prices will likely rise in the spring, so stocks with refining could move then, viz., VLO, MRO, HES and the integrated oils.

I think PCU will eventually be bought by China. I think someone will buy AA - either another miner or a Russian aluminum firm. There have been rumors that BHP will buy FCX ... and AA ...and they are trying to buy RTP. I think MRO and HES could be bought by a major integrated.

These are all long term positions for me and I expect to hold them into 2009 or longer.

Here's a bit more rationale: these companies produce raw materials that are costs for the rest of the world economy. And the demand is going up as are the prices. So overweighting these stocks is the only way to capture the value in that sector and to offset the increased costs that negatively affects other stocks. So I overweight them through my Alpha Fund holdings.

PS: yesterday was another in a long line of "Day 1" for potential rallies. This one had higher volume. As before, these mean nothing until a follow-thru day occurs.


Bunkerman said...

Durable goods weak. Even ex-trans.

Hello Ben ?

My gold mist acquisition won't hit the durable goods until next month ;-)

Frosty said...

Bunkerman...did you get any messages from the boy in DC...they know nothing.

Frosty said...

the fins spanking the shorts this morning...the sand people put is in a big caddy with two or more motors with perfomance measured in gallons per mile while selling them a chunk of C...america wins again.

Bunkerman said...

I haven't received a reply yet, but perhaps Kohn read my comment ?

Sand people seem to be smarter buyers than the sushi set of the 1980s.

Frosty said... it possible that the beefer bears are going to climb into their bunkers and not attack this move? building a base me thinks is about the best we can expect of course trading around is what I do as I build ...that gappa $ndx, best it fills by next thursday ie range trading ahead of the fed...nasty futures range that about right? would it surprise is the VIX broke over 30?

Where is Spinny and MLF when we need them? they must be fading us :)

Bunkerman said...

I think it's a metaphysical certitude that the beefers will hit this move ... it's just a question of when.

The 50 dma on the nazz 100 and the 200 DMA on the S&P would be logical places for them to attack. Or on any bad "news".

Some time end of month can bring window dressing.

mfl59 said...

Bunkerman you call this a rally? hahaha...I can't remember a trend up day like this with no hint of beefer raiding....lets see if we can get some "back and fill" in the next few days....

Frosty said...

DAY 2 GOLD MIST...dow 13k helmet pending further review of confirmation upon receipt.

Bunkerman said...

sheesh did I promise that helmet - I have a recollection of something like that

Frosty said...

dow 15000...SPIN-EM MLF59 and I...three helmets are due...think you have some time to prepare :)

Bunkerman said...

yes helmets for Dow 15000 - WW II style.