After several weeks of wandering CCU is still stuck in its trading range. Although I still expect CCU to eventually trade lower I have lost my patience. I am dropping it from the list.
EBAY has found a bid once again without dipping to our $34 entry target. I am dropping it also.
I am going to focus on energy stocks for the rest of the year. Should a golden opportunity appear outside the sector I will consider it but my focus will be on energy.
December oil closed over $60 on Friday and that could have serious implications for the sector. Now that the psychological $60 level has broken we could see a strong short squeeze. Yes, there are shorts in this market.
Talisman Energy, a takeover target I profiled here last week rose to a new high at just over $38 and stops should be placed just under $36. Congratulations to those readers who took the trade.
I am not going to make them trades this week but I read several articles about the shortage of cement. Evidently many builders are on allocation for cement due to extremely high global demand. Many contractors and cement plants are having to layoff workers because they can't get enough cement.
The major players in this sector are CX, FRK, LAF and EXP. Eagle Materials is a relatively new IPO and has risen from $55 to $95 over the last year. EXP distributes cement, Gypsum wallboard, recycled paperboard, concrete and crushed rock. The last year saw record earnings with a +59% growth. The Jan-06 $100 calls are just over $5 and with summer the highest demand season those profits are sure to grow into the 4th qtr. I profiled this for those looking for an additional opportunity.
Haliburton, HAL, broke out to a new high last week as a cap on a very strong month long move. However, that move only produced a +$6 move. I like HAL as a company but not as an investment. It moves far too slowly for me. However, HAL is about to split into two parts, one construction, one drilling. This should release substantial value for shareholders. The breakout last week could be the beginning of a new surge ahead of this split. The Jan-06 $47.50 calls are only $3.70.
I wanted to add DO, Diamond Offshore to the watch list this week but options for DO are obscene. The slightly out of the money 2007 LEAP was nearly double the price of the COP leap with both stocks in the low $60 range. Considering the upside of both companies the situation should be reversed with COP LEAPS having a significantly higher price. Avoid DO leaps.
I also wanted to add RIG as a leap candidate but option prices were also very high. Research also found that RIG had seen revenues fall in Q1 although earnings rose. While I think RIG is a good long-term candidate for increased drilling activity I would hesitate to buy its leaps.
I added Grey Wolf, GW, and BP to the watch list and will add some more next week. I want to see if this latest surge in oil prices sticks or we get a massive pullback from
touching the electric rail at $60.
Current Watch List
GW - $7.50 Grey Wolf Inc
** Breakdown Target $7.00 **
Grey Wolf, Inc. is a provider of contract land drilling services to the oil and gas industry. For the three months ended 3/31/05, revenues increased 99% to $150M. Net income totaled $23M, vs. a loss of $6.4M. Revenues reflect ongoing efforts for U.S. land drilling and a higher number of rigs working at higher day rates as well as solid results from the turnkey operations.
BP - $64.60 Diamond Offshore
** Breakdown Target $62.00 **
BP p.l.c. produces & markets crude oil & petroleum products worldwide. It is involved in exploration and field development throughout the world and is engaged in the manufacture and sale of petroleum-based chemical products. For the 3 months ended 3/31/05, revenues rose 15% to $81.01B. Net income rose 34% to $6.60B. Results reflect increased sales from all the business segments, higher marketing & refining margins and inventory gains