My drug of choice is a good IPA which CO produces a bunch of. You have to read the latest article from Jeremy Grantham, can google it, was on Barron's site. Says the bubble is not over yet and goes through the reasons, his value is 2250 before we get to bubble territory. The culprit in creating another bubble is the same, the Fed keeping rates too low for too long, and their attitude is that they will not try to prevent an asset bubble, but will clean up after it explodes. So this should be round three or whatever. He thinks we are early in a recovery which will keep the Fed in the low rate mode. And he sees lots of acquisitions, that makes sense, if you have restructure your balance sheet, the next move is to buy other competitors or to make strategic buys, rates will not get lower, and profit margins are high. I agree with everything except I think his 2250 is a low target. Time will tell.
The CNBC talking heads are saying it now, the market is ignoring geopolitical events, as they have been buying opps over the past couple of years. Earnings off to a fairly good start. Here's the consensus position, market ends higher year end, corrects 10% maybe before year end, that is a worthless call, and probably most importanty, where do you invest other than the market. The German bund yield is 1.2%. This feels different this time, the 10 yr yield went down and the market went up. Maybe we revisit 2% on the 10 yr with good stock performance. That's not a forecast I've heard yet.
One more comment, this market is somewhat baffling to me today. If geopolitical is not the risk it used to be, we survived things like Greece and Cyprus, more media events than anything else, and now the ME doesn't seem to be a concern. Can it be that we aren't worried about global energy disruptions, could be. That leaves the obvious, the Fed and when it starts tightening or it waits too long and the market makes the correction for them. My bet today, may change, is it takes a few years to play out. And the market bubble inflates. S and P 500 at 3000 in 16, plausible.
One more try, market multiple is 15x on next year. A talking head said it best, the things we are worrying about today, the geopolitical, the Fed..... they are the same things we talked about last year and the year before. I really thought and it may still happen, that the ME would eventually kill the market but it seems to shrugging off the move by Israel, still surprised. The market response seems significant, and oil weakness.
30 yr T bond at 3.3%, the market multiple should be higher, how much, how long.
Also surprised the DNR is $17+ per share with Brent at $108 and the global issues. Betting the e and p sector is significantly undervalued if oil doesn't move much from here. DNR is probably a $25 value.
Amazed that the market is moving up with what's going on in the world. Tells me that there is lots of cash still trying to find a home. Unless we have a complete blowup in the ME, I think the market moves up the rest of the year. Doubled up on my PDCE position. May sell some WMB to buy PAGP and CSTE. All three could double in the next three years. Assumes oil stays at around a $100 and rates don't spike. Might as well enjoy the bubble while it lasts.
Caesarstone, CSTE, Merrill Lynch recommended today with $54 target but more importantly projected $3.50 eps in '16, that's a 13x multiple. Should be maybe 25x, that would get the stock to $88, $47 today. Could go lower with ME violence but reports early August, could be back to mid $50s again.
Couple of observations, was in Houston, and the city is on steroids, construction cranes everywhere, housing prices booming. Didn't recognize parts of the city, completely redone. And yesterday, would have guessed that the e and p sector would have ticked up with ME turmoil, guess Don is right, a feeling that we may control our energy destiny. And just saw that OPEC global percentage of prod was down, but it's still 40% of global supply. Also, surprised that the market was not down more yesterday after the two incidents and looks like it may be green today. Listened to Druckenmiller saying that said the Fed is creating the next bubble with low rates, that feels right to me. And talked to a private equity person, the pension plans have lots of cash trying to find a home. Still think the scenario is for the market to rise another 50% maybe before it rolls over. And the aftermath will be ugly but it could be a couple of years away. As most say, what else are you going to do with your money. Maybe Birdog buying land is as good as any bet. ATLS probably doubles in two years. Still think PDCE is incredibly cheap right now. GDP should triple if the TMS works. And PAGP will be a good bet for infrastructure build out. WMB could be $100 with low rates and the 15% annual growth they are projecting. And Casesarstone, have a bought that, probably a good buy now with the problems in Israel. It's about the only non energy thing I've bought recently. Also, NDLS is in the $27 range, it's getting close to being a reasonable value, 40x 15 earnings, but may wait to earnings release to buy. If the concept works, could be up 5x in the next several years. With low rates, the values are there, with higher rates, not so much. Will be interesting to see how it plays out.
CBD, looked at CS projections for BCEI and PDCE, 16 ebitda mutlple at 4.1x. Would think they should both be in the 8x range. Still think PDCE gets the nod with the depth of reserve potential, BCEI did improve their position. Seems both will be above $100 in two years with stable oil price. The White Cliffs starts in August, diff should improve. CS still has a $65 target on BCEI and PDCE is at $86, they are using NAV of reserves for targets. EPS for both will be in mid $5 range, 10x multiple, seems cheap on that measure too. I'm guessing that PDCE should be $10 more in stock price than BCEI. Could be a good trade but I'm a lousy short term trader.
A CS comment on PDCE and CO trying to regulate drilling. I would be that PDCE price now will look good after earnings release, and oil seems to be bumping back up today. May buy some more today.
On the regulatory side, there is rising noise concerning frac regulation in Colorado (as well as
California) with two key Colorado initiatives of the initial 11 (one pertaining to
local control and the other increasing wellbore setbacks) remaining in the
process of obtaining signatures for inclusion on the November state ballot.
We argue PDCE’s 15% underperformance versus the EPX in the past
month on the back of this risk offers investors a solid entry point/
Bison, haven't seen the article. WMB is my largest holding by far, they say the div will be $3.25 in 16 at 3%, $108 stock price, $58 now. PAGP, 25% growth in div next three years, $1.50, 2.5% yield, $60 stock, $30 now, and the div is tax deferred for the next few years. OKE will probably be merged and SE is a good bet too. If rates stay low, the infrastructure space will spend a bunch of capital the next few years, values should rise. PAGP is a pure GP and they could do a big deal at PAA which would move PAGP further, PAA is underlevered now.
My math was faulty on linking but bottom line is if you believe the market's undervalued, the sector isn't reflecting $100 oil and the company is undervalued, PDCE looks like an easy bet. I think it's a double plus and BCEI won't be far behind. Seems SN will do well also.
I agree, just listening to Leon Cooperman. Said that 50% of a stock move is related to the market, 30% to the sector and 20% to the company. My belief is the market could go another 40%, a multiple of 20x, before we roll over. Valuation of the sector could move up 30% on a move to $100 vs maybe $90 and I think PDCE is undervalued by 30% at least. 1.40x 1.30x 1.30% is 130% upside from $56, $130%. Most of the sector should do well if those expectations become reality. My favorite investment now is PAGP, the GP of PAA, the best oil infrastructure company, you mentioned the pipeline in the Wattenberg, White Cliffs I assume, owned by SEMG, probably they get bought buy someone.
The other company that I would like to own is GDP, for the TMS play. They own 300k acres in the play and for a billion market cap, they could triple if the play is as good as some say it is, HK and ECA both see it as core assets.
Again, good move on BCEI and I agree with you, now is the time to buy cos in the energy space that you like, if you believe Cooperman, 80% of the return is market/sector related, doesn't hurt if you get the co right also. PDCE is my bet and others should do well also.
CBD, don't remember about the pipe for PDCE. I have been buying PDCE the past few days, seems to me to be as good a value as any in the sector, not quite sure why the relative weakness although it had a good run before. I thought about moving PDCE to BCEI in the low $40s, good move on your part. I don't own SN at the moment, sold it at a few dollars higher and think it's a $40 plus stock easily. I want to think this sell off gives an opp and oil stays at around $100 for a while. I am rolling the dice on PDCE, will probably buy more. I still think it is a $90+ value min. Saw Scott Black on recently, had a $90 value for proved plus $70 for additional potential.