Frustrated But Confident
After seeing several of our targets race out of reach it is frustrating but that also gives us confidence that our existing positions are gaining in value. Would you rather have more positions or profits from the ones we already own? I think the answer is simple. I will take profits every time.
I am removing several targets simply because I doubt or maybe hope that they will never return to our target range. If they did return it would mean problems for the larger portfolio. I will continue to add positions only if I think they have a very good chance of becoming quickly profitable and a reasonable chance of being triggered.
It is tough to find any non-energy targets today because most of the other sectors with good leap candidates have already moved out of range given the strong rally over the last couple of months. I am hoping for some earnings surprises that could give us an entry point in a good stock on an oversold dip.
I considered Las Vegas Sands (LVS) as a candidate but the recent spike has pushed LEAP premiums into the stratosphere. I will keep it on my personal watch list. Ditto for companies like RIMM and POT. Southern Copper (PCU) split 2:1 on Oct-2nd then blasted off for new six-month highs. I added it as a candidate hoping for a resistance failure at $50 to give another chance.
I think Goldman Sachs holds the current record for highest priced LEAPS after its vertical performance since mid-September.
If you look closely at the market you will see that metals, commodities, wood, building materials and energy are all showing increasing investor interest. I believe that once techs and blue chips roll over those stocks will be leaders once again.
Future watch list additions may come from sectors other than energy and only when real value appears. That may take a while given the current new index highs.
Current Watch List
CHK - Chesapeake Energy
Chesapeake Energy Corporation (Chesapeake) is an oil and natural gas exploration and production company. It is engaged in the acquisition, exploration and development of properties for the production of crude oil and natural gas from underground reservoirs, and the marketing of natural gas and oil for other working interest owners in properties it operates. As of December 31, 2005, the Company owned interests in approximately 30,600 producing oil and gas wells, which were producing approximately 1.5 billions of cubic feet equivalents (bcfe) per day. On November 14, 2005, Chesapeake acquired Columbia Energy Resources, LLC and its subsidiaries, including Columbia Natural Resources, LLC (CNR) and its natural gas reserves, acreage and mid-stream assets. In 2006, the Company acquired oil and natural gas assets from private companies located in the Barnett Shale, South Texas, Permian Basin, Mid-Continent and Ark-La-Tex regions. It also acquired an Oklahoma-based trucking company in 2006.
Buy 2009 $30 LEAP Call VEC-AF
ECA - Encana
EnCana Corporation is a natural gas producer in North America. It is a holder of natural gas and oil resource lands onshore North America. The Company is also engaged in select exploration and production activities internationally. EnCana operates under two main divisions: Upstream and Midstream & Marketing. The Upstream division manages EnCana's exploration for, and development and production of, natural gas, crude oil and natural gas liquids (NGLs) and other related activities. EnCana's Midstream & Marketing division encompasses the Corporation's market optimization activities and remaining midstream assets. EnCana is in the process of divesting the majority of its remaining midstream assets, including its natural gas storage business and the Entrega Pipeline.
Strong support at $40 should be our first target with a backup at $35 for a second position. Encana is attempting to sell some midstream assets and that could impact the stock price significantly when it happens.
Breakdown target: $42.50
Buy 2009 $50 LEAP Call ZBM-AJ
Marathon Oil Corporation (Marathon) is engaged in the exploration and production of crude oil and natural gas on a worldwide basis. The Company operates in three business segments: Exploration and Production (E&P), Refining, Marketing and Transportation (RM&T) and Integrated Gas (IG). The E&P segment explores for and produces crude oil and natural gas on a worldwide basis. The RM&T segment refines, markets and transports crude oil and petroleum products, primarily in the Midwest, the upper Great Plains and southeastern United States. The IG segment markets and transports natural gas and products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol on a worldwide basis. On June 30, 2005, the Company acquired the remaining 38% ownership interest in Marathon Ashland Petroleum LLC (MAP). As a result of the acquisition, MAP became a wholly owned subsidiary of Marathon and was subsequently renamed as Marathon Petroleum Company LLC (MPC).
Breakdown target: $76 *** Change ***
Buy 2009 $90 LEAP Call VXM-AR *** Change ***
HES - Hess Corporation (Formerly Amerada Hess (AHC))
Hess Corporation explores for, develops, produces, purchases, transports, and sells crude oil and natural gas. These exploration and production activities take place in the United States, United Kingdom, Norway, Denmark, Russia, Equatorial Guinea, Algeria, Gabon, Libya, Indonesia, Thailand, Azerbaijan, Malaysia and other countries. The Company also manufactures, purchases, trades and markets refined petroleum and other energy products. It owns 50% of a refinery joint venture in the United States Virgin Islands, and another refining facility, terminals and retail gasoline stations located on the East Coast of the United States. As of December 31, 2005, the Company had 692 million barrels of proved crude oil and natural gas liquids reserves.
Breakdown target $38 *** Change ***
Buy 2009 $40 LEAP Call VHS-AJ
MDR - McDermott Intl
McDermott International, Inc. (MII) is the parent company of the McDermott group of companies, which includes J. Ray McDermott, S.A. and its consolidated subsidiaries; McDermott Incorporated (MI) and its consolidated subsidiaries; Babcock & Wilcox Investment Company (BWICO), a subsidiary of MI; BWX Technologies, Inc., a subsidiary of BWICO, and its consolidated subsidiaries, and The Babcock & Wilcox Company, a subsidiary of BWICO, and its consolidated subsidiaries. Through these subsidiaries, MII operates as a global energy services company with three business segments.
Breakdown target $39 *** Change ***
Buy 2009 $50 LEAP OYZ-AJ
PCU - Southern Copper
Southern Copper Corporation is an integrated producer of copper, molybdenum, zinc and silver. All of the Company's mining, smelting and refining facilities are located in Peru and in Mexico, and it conducts exploration activities in those countries and Chile. With the acquisition of Minera Mexico in April 2005, the Company focuses on three segments: Peruvian operations, which include the Toquepala and Cuajone mine complexes, and the smelting and refining plants, industrial railroad and port facilities, which service both facilities; Mexican open-pit operations, which combined two units of Minera Mexico, Mexcobre and Mexcananea that includes La Caridad and Cananea mine complexes, and smelting and refining plants and support facilities servicing both complexes, and Mexican underground operations known as IMMSA unit, which includes five underground mines that produce zinc, lead, copper, silver and gold, a coal and coke mine.
Breakdown trigger: $48
Buy March $50 Call PCU-CJ (no leaps)
BTU - Peabody Energy
Peabody Energy Corporation (Peabody) is a private-sector coal company. During the year ended December 31, 2005, the Company sold 239.9 million tons of coal. It sells coal to over 350 electricity generating and industrial plants in 15 countries. At December 31, 2005, the Company had 9.8 billion tons of proven and probable coal reserves. The Company owns, through its subsidiaries, majority interests in 32 coal operations located throughout all the United States coal producing regions and in Australia. In addition, Peabody owns minority interests in two mines through joint venture arrangements. Most of the production in the western United States is low-sulfur coal from the Powder River Basin. In the West, it owns and operates mines in Arizona, Colorado, New Mexico and Wyoming. In the East, it owns and operates mines in Illinois, Indiana, Kentucky and West Virginia. The Company owns five mines in Queensland, Australia. Most of the Australian production is low-sulfur, metallurgical coal.
Breakdown trigger: $38
Buy 2009 $50 LEAP Call ZZT-AJ