12
Jan

Wrap – Week Ended 01/11/08

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1) Lousy week for the oily stocks which underperformed the market as they moved lower with oil. This was the first week in six that the XOI has underperformed the broader indexes. The XOI contains a mix of majors and large cap independents and these stocks have for the most part experienced upward estimate revisions due to higher than anticipated 4Q oil prices. In fact this past quarter was the biggest surprise in terms of actuals to estimates in recent memory.

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I'll have some commentary about where I think we could see some surprises this week.

2) Gassy stocks fared much better as natural gas turned in another strong performance. Click here to see my recent thoughts on gas. In a nutshell we're probably close to topped out in the extremely near term as weather turns warmer and comparisons relative to year ago levels get more difficult.

3) CFTC Shows Traders Still Very Short. A slight cover may have helped drive NG prices over $8 in the last week. Taken together the following two charts show the potential for the herd to be right in the medium to long term and wrong in the short term. In case you are wondering that first low point in July 2007 on the first chart reflects record amounts of net short interest. 

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4) Transportation rates continue to get pounded. See Friday's post for thoughts on the dry bulk sector. I'll have some fresh commentary there this week having had lunch with a transportation analyst on Friday.

5) In the week ahead look for a continuation of the sector multiple updates as we visit the solar and E&P sectors.  Also look for a briefing on E&P names most like to cruise or lose as the upcoming quarter is released.

6) Closed Positions for January Watch: (quiet month so far)

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8 Responses to “Wrap – Week Ended 01/11/08”

  1. 1
    zman Says:

    Tupp – Here’s a Fool piece from last year that makes a valuation argument that I agree with:

    http://caps.fool.com/Blogs/ViewPost.aspx

  2. 2
    TTupp Says:

    the link doesn’t work, unless you wanted me to see the 404 “file not found” page. i tried taking off the last three periods and searching the url on the motley fool site. i dunno.

  3. 3
    zman Says:

    T – I guess not all Canadians are funny. Yeah, the link worked before, busted now. It was a piece that showed the high valuations of some parts of the solar group relative to others.

    One other potential hazard which some have pointed out at length is the fact that the FSLR type of thin film solar is Cadmium Telluride (CdTe). The (Te) is tellurium, a substance more rare than platinum. While rare in nature it is produced from copper blast furnaces at a rate of 1 pound of tellurium from 500 pounds of treated copper sludge. Prices have gone from $7 per pound in 2002 to $100 in 2006 as production is not really growing but demand is from solar and other applications.

    With FSLR’s production capacity doubling about every two years the theory goes that they won’t be able to meet demand and that the price of (Te) will soar. This guy seems to be on top of the “tellurium shortage” story and sums it up pretty well here:

    http://seekingalpha.com/article/54614-first-solar-vulnerable-to-a-tellurium-shortage

  4. 4
    TTupp Says:

    what im a “funny guy?”

  5. 5
    zman Says:

    T – I just think that certain players like FSLR are over-valued right now…of course they can stay that way for a long time.

    I’ve been thinking that Solar would be LESS insulated from the economy, than say, Oil. Oil I need to heat my house or drive my car or fly in a plane or get goods to and from where goods need to go etc. I don’t need oil to make electricity …in the U.S. < 3% of generation comes from oil. At this point, solar is a luxury. Some home builder, rising out of the ashes should become the first public giant all green builder with solar panels an extra option. But that won't happen this year because even with heavy discounts one might have noticed homes are selling to good in the U.S. right now. In the mean time, capacity growth is jumping like the semiconductor fabs of the 90s, raw materials (in some cases) are growing harder to come by, and again, the PE's (in some cases) have gone parabolic.

  6. 6
    ram Says:

    How do you buy tellurium metal ingots?

  7. 7
    TTupp Says:

    i have a smelter in my spare bedroom ram. i will source you with 100,000 metric tons for may delivery, okay? lol no but really i hve no idea, the guy is probay a dreamer/ liar. i doubt you can trade in substances so carcinogenic/ dangerous legally.

  8. 8
    zman Says:

    Agreed, sounds like impossible to trade for an individual.

    http://www.mmta.co.uk/economicsFacts/Articles/MiningJournalReview/Tellurium.pdf

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