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Discussion topic - Energy Ideas

Brad
Sat, 09 Jan 2016 17:12:17 GMT

It's certainly been a blood bath across the entire energy sector. At some point, oil production will have fallen enough and sentiment turns. Any ideas on what to pick up for long term gains - BRS, SLB, MPC, VLO - any ideas or key energy analyst worth following ? BRS as an example is off 75%. Love to hear any ideas.

David
Sun, 10 Jan 2016 07:28:59 GMT

Brad, I subscribe to Dallas Salazar's CapGainr service via Montext. He concentrates on beaten down E&Ps and has intimate knowledge of this sector. He does not maintain an active portfolio tracker and he does not make specific buy and sell point recommendations. He is extremely personable and uses a live chat room to actively engage with his subscribers. Subscription also includes monthly one-on-one phone calls. His service naturally attracts subscribers who are also closely tuned into the E&P sector, so it is a great source of information. They are a bit of a wild bunch but a valuable source of info. Dallas makes mistakes like everyone else (for example, he's also a GLUU holder), but he is openly honest when things go awry of his thesis while remaining fully engaged with his subscribers. Never goes into hiding and never gets into spats with subscribers. That's just not his style. He also invests in small cap technology stocks. He is very conservative about the num ber of active picks. For example, currently he only has two E&P picks and we are all waiting like vultures to buy in when their prices ultimately tank (hopefully). Check him out on SA.

Remi
Thu, 14 Jan 2016 09:02:58 GMT

Energy - I've invested in oil/natural gas as well as gold/silver companies in the past (my first picks were not my own and looking back I just thank my lucky stars I did not wipe out my portfolio). Here are some thoughts to consider. Oil - I look at the current prices and really do think we are looking at a good deal at the moment with it sitting around 30 a barrel, 12 year lows. Similar to natural gas which was sitting at 17 year lows just a month ago (I bit my tongue on that one since I am not an expert in the industry as some are, it was going against me temporarily and it's a riskier bet in short term for some short term plays but looks like there was a nice bounce to bet on for UGAZ) Oil rigs are increasingly falling, so to me it's just a waiting game when the rebound will occur - we may never revisit historical highs but it's safe to assume that oil will be significantly higher at some point. But the question with oil is that even if you have a strong opinion that it just just has to get past an extreme as we have experienced many times in the past decades, how do you play it? I remember a nice fellow called Giovanni on here in the old forum who seems to have bailed on PTT over a year ago. He was focusing alot of his investments on oil/commodities and Europe. One of our exchanges was here: http://pttresearch.com/members-2/giovanni-ghirardi/activity/11769/ I still actually believe in much of what I posted there and needless to say, without actually taking the time to look up all the tickers he mentioned, I'm sure it's been a blood bath for all the names. Having some experience with attempting to swing upstream with gold/silver miners, I know that it is a risky proposition. First you have to be really choosy in companies - find one of the lowest cost producer that has a decent balance sheet, basically one that isn't losing money or that if it's losing, its cash balance can cushion things for several years. At 30 dollars a barrel, does anyone know of such a company? The problem with investing in a company that's losing decent money is that if things stay depressed for a decent amount of time, it could dilute itself substantially or worse even go bankrupt - and thats EVEN IF the price goes up. Again, on the old forum I had this exchange with Jonathan Fishman where I pointed out Perpetual Energy, which is such a levered company, as a decent short: http://pttresearch.com/members-2/remi-sabouringmail-com/activity/10080/ Well that company in about a year since that post has gone from over a buck a share to 4 cents! Think about that - do you want to accept that risk? (maybe the big money can be made in shorting these though...) Luckily my favorite gold/silver miner Silvercrest was a low cost producer with cash on its books and it got acquired - actually made a bit of money on that one, a little miracle. (and the next miner I have played with now is Lake Shore Gold which I've also made money on with the swings) However if you can't find such a company my opinion is that it's an uninvestable space on the long side. Is there a safer or better way to play it? If you do believe the price of a commodity is trading too low - one idea is, rather than play a producer of the commodity, why not play the commodity itself? To buy oil, you have USO which is trading the next month's futures or if you are looking even shorter term you have UWTI which is the 3X levered one. Due to contango/decay effect with these etfs (especially the 3X ones which are a guaranteed big money loser if you hold them too long) and how it seems impossible to predict a timing for the rebound in oil prices, these are less ideal. One other one that's a bit safer due to I believe a minor decay is USL - this etf buys all 12 future month contracts, therefore they just have to sell/buy 1/12 of their futures every month. Even though it won't jump as high with short term spikes, it may still be one of the best ways to play a longer term sustainable rebound on oil. But I will propose a much better way to play low oil - why not find correlated sectors that have fallen with low oil prices yet are not really fundamentally affected due to low oil prices? One example could be oil refining, another could be pipelines, I haven't done tons of research recently in the names but this is just a suggestion to review these types of companies. Another decent example is one of my current names - Westjet, a Canadian airline (WSJ.TO and I believe they do have a low volume ticker on the US side) - there's some concerns with a) hurting commodity-driven economy and weak Canadian dollar leading to some reduced travel to the US and b) low oil prices inviting more discount airlines but overall the stock is too cheap right now, it pays a dividend, management is excellent and probably will post record profits due to its lower costs in this cheap oil environment Even better than all this though, let's say you want energy in your portfolio - you should really realy consider solar companies - they tend to drop big when oil drops but rebound much faster even if oil goes sideways. Solars have been hit hard in the past month yet the fundamentals for many names and the industry is stronger than ever - notably those companies that are profitable. Solar is the future (and actually the present more and more) And the news keeps getting better with growing demand set for at least the next 5 years.

David
Thu, 14 Jan 2016 18:27:03 GMT

Remi, I have yet to see any of the many media pundits attempt to explain why solar moves in the direction as oil. It is really mystifying. JKS is heading towards its support range of $16-$18 while there is no news anywhere that says solar is slowing down. As for pipelines, most of the operators are MLPs and they have taken a royal shellacking due to their high debts. I had a fair share of money in MLPs last year and sold out at significant losses, but then they tanked 70-80% more, so it pays to get out when things are bad and getting worse. Should be some good buys in pipelines around summer this year. There's going to be a lot of bankruptcies in 1H 2016.

Gregory
Fri, 15 Jan 2016 17:37:44 GMT

Remi just curious what your thoughts are on JKS and JASO?

Remi
Sat, 16 Jan 2016 05:03:44 GMT

If you screen stocks by deep value, I believe 4 solar stocks come up in the top 10, it's amazing how the price never breaks out. Everything is proceeding very positively for both these on a fundamental basis. The buyout offer for JASO caps its price for now - it sits at a 20% discount again to that lowball offer and trading at less than half its book value so its a very low risk proposition. Depending on how you draw the channel on the charts, JKS may have just hit the bottom, although its hit 16 a few times in the past few years - lots of upside. TSL is another very cheap one which I'm considering buying now actually, it's also Chinese that is now sitting 30% below its recent buyout offer and its the lowest cost producer. The story has not changed from what I've posted before, here's a semi recent article from Jonathan Fishman on the financials for JKS and JASO: http://seekingalpha.com/article/3723776-why-good-solar-stocks-dont-rise-with-the-sun

Alan
Sat, 13 Feb 2016 23:41:34 GMT

Hi Remi - I'm curious to know your current thoughts on JKS and whether anything has changed to your comments above. I have relatively little knowledge on the company (certainly relative to you) but I read some of Fishman's articles and it has been on my watch list for some time. It seems like it might be a good candidate for trading (MG has turned us all into traders). It looks like it cycles between highs of $30ish and lows of $17ish fairly often. Is this something you have been trading in and out of? Do you think its worth looking into?

Calvin
Sun, 14 Feb 2016 00:49:42 GMT

In addition to those, PEGI has taken a beating. I don't understand why as it seems pretty safe.

Remi
Sun, 14 Feb 2016 01:18:40 GMT

I have traded JKS and JASO otherwise I would be sitting on a big loss (Fishman mentioned JKS at 30 and JASO at 10 I believe...) Yes this is dejavu of the dejavu. The US announced the extension of the solar credit which is great news for JKS which has already booked up alot of US business. One wild card is the further yuan depreciation, unsure of the net effect of that. But basically when oil crashes, all energy stocks crash - it's been like this for a year and a half now. And also everytime there is bad news from other solars that are losing money they all drop a bit as a group. So it's just 'sympathy pains' until i see any different, both companies are still doing great (MAKING money, not losing) and JKS currently sitting close to the bottom of trendline depending how you draw them out.

Remi
Wed, 23 Mar 2016 14:50:21 GMT

FYI I don't like oil at the moment - it came close to my target of 42 USD a barrel. If it drops, all correlated stocks will too including solar and the Canadian dollar, so I did take a bit off the table a week back. Westjet still good in the long run. Medicure I'm really bullish on still and increasingly based on my research, added a bit more on the last drop - there are some potential fireworks brewing.... plus one of the key insiders has been buying before the earnings....