Four extremely supportive tidbits in Barrons this weekend.
First, by far the most important was the article profiling PDC. Pointed out how cheap the stock is, how much it has pulled back, how the top, and eventual crash of the drilling boom is already priced in, etc.
Moreover, it attributed all the weakness to the drop in NG. PTEN, NBR, UNT or a few others could easily been substituted for PDC.
Scott Black is cited in the article saying PDC is one of the cheapest stocks in the universe. Ya think??
Second, the Trader article, probably the most widely read in the entire rag, did a few paragraphs on NG. It points out that NG is probably close to bottom, and how the CL/NG ratio has gotten completely of of whack. Everyone points to the contango situation inherent in the strip.
Third, in an article pointing out how large cap is cheap historically to small cap, UNT and XEC are two of the only S&P 600 stocks whose PE's are far below their 60 month trailing average. Bottom line is NG stocks, most notably the drillers, already have disaster priced in. In these kinds of situations, when the bad news finally comes out, the stocks usually move up. If the fear never actualizes, the stocks go to the moon.
In a side note, the NYT publishes a table listing the S&P 100 stocks, and how they've performed YTD, and over the last calendar year.
The results are startling. BHI,SLB, and HAL are all members of the S&P 100. They have appreciated 75%,71%, and 68% respectively over the last 52 weeks.
NBR is up 10%. The disparity is unprecedented as far back as the charts go. My point is that if things really get bad, thost stocks, along with WFT, will provide a great hedge.
I firmly expect that if NG prices sharply rebound, much of NBR's 60% discount will quickly evaporate. The long term charts on on my side. If NBR had just kept up with the aforementioned stocks, as it did in 2004, and 2005, it would be trading at 50 plus right now.
NEW YORK, June 11 (Reuters) - Shares of Pioneer Drilling Co. (PDC.A: Quote, Profile, Research), which are off by almost half from their high in February, could recover as prices of natural gas look set to rise during winter, according to Barron's June 12 edition.
Barron's cited Delphi Management's Scott Black, who is bullish on U.S. natural gas, as saying Pioneer Drilling's stock is trading cheap.
Black has a 12-month price target of $22 for Pioneer Drilling. The stock, which reached its year's high of $23 on Feb. 1, closed at $13.46 on Friday.
Pioneer, which beat Wall Street expectations in fiscal 2006 on strong demand for its drilling rigs, has healthy finances, but its stock has taken a hit as the price of natural gas fell from post-Hurricane Katrina levels, Barron's said.
But the price of natural gas, which is around $6 per million British thermal units -- down from around $15 last fall -- is likely to rise again in the winter, the weekly said.
Great post Ryan. Was the top 100 Smallcap 600 stocks posted this weekend. Someone on the HELX board posted that HELX, among some other energy stocks, made it.
I agree that PDC is a relative bargain these days, but I cant help but follow the fundamentals, and NBR has the biggest advantage of working with the majors with long term contracts in place. This is why you may have observed recently that PTEN tends to move up more on an NG boost -- PTEN doesnt have the long term contracts, so they benefit more by NG increase. It's nonsensical -- and just my speculation, which is worth little.
Didn't see the arfticle on PDC, but in the market Laboratory page M58 I did notice electricity production was 79,000 MW in the latest period ending June 3 vs. 74,000 in the preceding period and 69,000 a year ago....2,104 rotary rigs running on June 9 vs. 1,950 in preceding period and 1,658 year ago.