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Lufkin Industries Inc. Message Board

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  • easy_money006 easy_money006 Apr 3, 2006 1:01 PM Flag

    Why did the stock fall on the last ER?

    IMO, there were two main causes:

    (1) there was a significant drop in crude oil prices occuring during the first half of February ($69 to $59). If you compare the crude oil price chart

    http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&yr=0&mn=3&dy=0&id=p65305624147

    with that of LUFK's, you can see the strong similarities.

    (2) the drop in oil prices appears to have encouraged a coordinated pullout of the entire energy sector by hedge funds and other institutional investors. If you look at stocks like cop, vlo and eca, you'll see that they too like LUFK had exceptionally high volume days on Feb. 8. 9 and 10 (and similar price declines). Afterwards, IBD dropped LUFK from their IBD 100 list and gave it a "accum/distribition" grade of D.

    Unfortunately, earnings were announced on Feb. 9 while the stock dump was in progress. It was a classic case of "buy on the rumor (of another great quarter) and sell on the news" (exceeding analysts' expectations).

    Since mid-Feb., oil prices have inched upwards again and so has LUFK's price. However, the daily volume has remained low. If the institutional investors return (which should be evident by a greatly increased volume), IMHO the price will move up very quickly afterwards.

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