Wrap – Week Ended 2/22/13

Busy and tough little week. Comments will be included in the Monday post. 

Holdings Watch:

  • MMR - We closed out the remainder of our long held MMR position as the name continues to creep higher following the FCX buyout, nudging the implied valuation of the future Ultra Deep RT towards a range where we will probably just add it back opportunistically at a better level in the market than wait out the cash and conversion of the rest of our shares. It's been a long, volatile, but certainly interesting run. We thank Mr Moffett for the profits (slimmer than anyone expected except for the more recently added ones last Fall but still positive) and for the education over the years on the Gulf of Mexico offshore depositional environment and what can be achieved with a lot of will and money.   We continue to hold EXXI for other fundamental reasons but note that it does continue to give the portfolio UD exposure
  • We used the mid week dip to add to a couple of ZLT positions. The Blotter is updated here. 

31 Responses to “Wrap – Week Ended 2/22/13”

  1. 1
    zman Says:

    WTI off 3% last week, first down week in 7:


    That's healthy. 

  2. 2
    zman Says:

    The ZEB top 10 pie and notes will be in the Monday post or can be seen on the ZEB Positions tab here now:


    The Blotter is updated


  3. 3
    nrgyman Says:

    Barrons article today highlighting the bull case for refiners.  Behind the product export growth story:  US refiners can sell product in Latin America cheaper than locals.  Biggest risk is global recession, where WTI prices plunge and NAM production slows significantly–limiting low-cost feedstock for refiners.  Otherwise, the long-term trends should remain in place fueled by NAM crude production growth, cheap natgas energy costs and global product demand.  Refiner multiples should climb from around 8 currently (SP 500 at 13-14 now) to reflect the long-term fundamentals.  Dividends are expected to grow as well, along with multiple-enhancing strategies to drop down assets into MLPs.  

  4. 4
    zman Says:

    re 3 thanks. 

    Did Barrons print a follow up to last week's story on LINE?

  5. 5
    nrgyman Says:

    RE 4:  Nothing specific on LINE that I've seen.  Barrons still lists LINE as a bearish magazine pick in their picks & pans portfolio and references the bearish article from last week.

  6. 6
    zman Says:

    Thanks again. Back in awhile. 

  7. 7
    zman Says:

    Iran on the tape announcing 16 sites it wants to locate reactors in and says it has 3x more raw uranium than previously thought

  8. 8
    crysball Says:

    Best  January  ever  for  Trucking [data  from  ATA via  Clculated  Risk],  has  to  have  implications  for   distallate  going forward:

    Friday, February 22, 2013

    ATA Trucking Index "Best Ever January"

    by Bill McBride on 2/22/2013 04:05:00 PM


    This is a minor indicator that I follow. This index has been very strong following the dip in October due to Hurricane Sandy.

    From ATA: ATA Truck Tonnage Index Posts Best Ever January

    The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 2.9% in January after jumping 2.4% in December. … Tonnage has surged at least 2.4% every month since November, gaining a total of 9.1% over that period. As a result, the SA index equaled 125.2 (2000=100) in January versus 121.7 in December. January’s index was the highest on record. Compared with January 2012, the SA index was up a robust 6.5%, the best year-over-year result since December 2011.

    “The trucking industry started 2013 with a bang, reflected in the best January tonnage report in five years,” ATA Chief Economist Bob Costello said. “While I believe that the overall economy will be sluggish in the first quarter, trucking likely benefited in January from an inventory destocking that transpired late last year, thus boosting volumes more than normal early this year as businesses replenish those lean inventories.”

    Read more at http://www.calculatedriskblog.com/2013/02/ata-trucking-index-best-ever-january.html#mEzSe1AGqlM6xkBX.99

  9. 9
    crysball Says:

    Asked   if  anyone  was  following  NTI  a   niche  refiner  in  Minnesota  with  its own  proprietary    distribution network [SUPERAMERICA…both  owned  and  franchised]  and  includes  piepelines.    It     is  a jucy  yield  story  which   may  see   multiples  expand as  energyman   points  out  in #3  above.
    Could   you  take  a  look?

  10. 10
    zman Says:

    re 8, thanks, will do. 

  11. 11
    nrgyman Says:

    Gasoline tax increase getting some academic support:

    "Amid worries that rising gasoline prices are on the verge of pushing the U.S. into a recession, an MIT study makes the case for even higher taxes at the pump. If the goal is to get Americans to drive less and use more fuel-efficient vehicles, and to reduce air pollution and greenhouse gases, the study says higher gas taxes are at least six times as effective as stricter fuel-economy standards."  (from Alpha)

  12. 12
    nrgyman Says:

    RE 11:  Here is a better idea than increasing the gasoline tax:  Slap an import tax on each barrel of crude oil imported from outside of North America (domestic drillers, Canadian and Mexican producers would like this).  In addition to stimulating substitution of natgas and electric vehicles for oil in the transportation sector, it will motivate the refiners to alter capacity to use NAM crude, encourage expansion of NAM pipeline distribution networks, incentivize conversion from heating oil to natgas heating, and wean us from dependency on OPEC.  This may be all that is needed to get natgas transportation really moving while maintaining a healthy domestic oil production and infrastructure industry.

  13. 13
    brodway Says:

    re: 3
    you actually were ahead of Barron's on this topic as you responded to my request for ideas in energy land earlier this month. you had in fact suggested refiners as an interesting place to find value and mentioned a few name including Holly and Valero. still have not pulled the trigger on anything but have been watching and researching this group more closely. 

  14. 14
    brodway Says:

    Do you still have interest in EVEP? I've been following the stock for some time. Haven't done anything, but saw recently the chart starting to break down. Not sure if this is a cause of recent fundamental changes in the company or just a lack of interest in the stock. Looking at the chart closely, it had broken both the 50 and 200dma and seems to coming down towards/filling in the gap from last July where it established support at right around $50.

  15. 15
    nrgyman Says:

    RE 13:  I'm still bullish on the refiners but cautious on the market.  Sold out of my refiner positions (among other equity positions) since that referenced post, except PBF and CLMT (for income portfolio).  If the market corrects the refiners will do so as well do to large price run-ups over the past year.  However, I am looking to add back in to the refiners after they consolidate.  Not sure where that price level will be.  They have not come in much yet, as they continue to enjoy solid fundamentals.  When the market rallies again I expect the refiners to be participants.  IMO, an energy portfolio should have a domestic refiner presence.  Even XOP, the E&P etf, is loaded with refiners at the top of its holding list.  Timing the purchase is tricky right now due to equity market dynamics.  I'm interested in adding HFC, MPC, VLO and possibly PSX or DK on a correction.  The problem is these stocks are not really correcting, at least not yet.  As I mentioned previously, I may have taken profits too soon.  I've taken much more since then, but it may also prove too soon as the fundamentals are still bullish.  It's just that the market can be such a beast when it turns negative and my thinking lately is that it may do so before too long.  But I've been wrong many times before so do your own DD.

  16. 16
    nrgyman Says:

    RE 14:  Just bought some EVEP Thursday and Friday.  It is bouncing after a downtrend.  Could continue down but valuation looks more interesting and it pays 5.7%.  Reason for the downtrend is that holders are waiting for EVEP to sell some Utica leaseholds and they have not done so yet, even after the CEO indicated it would be done by year-end 2012.  Speculation is rife about why not and is causing some holders to lose confidence.  EVEP is a valuation play ATM and that valuation depends on what prices they can fetch for the Utica assets they hold.  Their plan is to preferably swap non-producing core Utica assets for producing assets elsewhere, in a tax free exchange, and boost the income to the units by levering up and acquiring even more assets.  Some analyst estimates suggest the stock could trade north of $65 with a reasonable Utica transaction.  So I'm back in EVEP with that thought in mind.  EVEP has a Q4 report CC this Friday (3-1-13) at 9 am.  Should be interesting, as they have said nothing since last year about why no sale after leading investors to believe a deal would be done by year end 2012.

  17. 17
    brodway Says:

    " It's just that the market can be such a beast when it turns negative and my thinking lately is that it may do so before too long."
    Nrgyman, 2 weeks ago i was of the same opinion as you. Sold in the money calls in some large positions where i had significant profits. Most of those positions were taken on options expiration. After watching the tape this week, it almost seemed too many people wanted to move equities down too fast. Then i thought to myself, if this is in fact an orchestrated effort of the risk off trade, then we will probably move higher after the first support level is hit. Old friend says, the market will move in the direction that will hurt the most amount of people. To me, right now it seems there are too many institutionalized short positions and not enough long term holders. This can be evidenced by violent moves to the downside and slow moves to the upside. (albeit the move in COG was impressive) If and when the moves up become more easily achievable and when the average Joe starts to believe that he is late to the game and starts to buy up the small cap names that haven't moved yet is when its time to jump ship. Having made many mistakes in the past this phenomenon almost always is a warning flag.  Would not be surprised to see another sell in May and go away style move down in April 🙂

  18. 18
    brodway Says:

    re: 16
    great stuff. exactly what i was looking for. i was looking strictly from a technical point of view and thought the low 50 area had previously served as support prior to a move up. i was looking at selling the 50 March puts, surprisingly paying a decent premium.

  19. 19
    zman Says:

    re 17 

    Exactly 2 weeks ago we wrote this:


    ZLT Vs Macro Backdrop

    • We're up about 15% year to date (the ZLT C is fairly balanced in 6 names but our other portfolios which together hold varying amounts of the rest of the names in the ZLT are up similarly). 

    • We hold 26 names at the moment,
    • What's been working lately (for us):
      • Oily names, leadership names in the Bakken (CLR, OAS), BCEI (following leadership up in the Wattenberg),
      • Some of the bigger gassy names,
      • Select micro cap ideas (OEDV, SDCJF),
      • Yield names in the post-fiscal-cliff period

    • What's not been working (so far for us): 


      • Leveraged gassy names that ran out of steam (for the moment on mild weather early and now in the later middle of the withdrawal season), – XCO

      • Some mid cap gassy getting oily names (for the moment): (NFX – starting to bounce but only after the big fall)
      • HK – sort of moving better but it took a beating late last year so this is just snap back and we think a better understanding that they are 80% oil with much of that getting premium to WTI pricing
      • Coal (we own a tiny position in BTU and that's it). 
    • The energy indexes have been moving well as well. We think the Service names are discounting a gently rising NAM rig count and price stabilization or even increases that may not actually materialize this year. 

    • What We're Thinking Now:


      • The "Sell in May and Go Away" effect is going to be around again this and may come sooner given A) that we've had a strong run in the markets in general of late, B) we have the sequester and debt ceiling issues in the not too distant future, and C) "too far too fast moves" often attract hot money that knows tickers and little else ("they produce oil, their chart looks great") and hot money punts at the first signs of weakness,

      • There is often a quiet period of reflection and pullback post quarter … that time when everyone seems to think they know everything about the coming year's individual company plans, near term catalysts are now in the very recent rearview mirror with little in the way of current drivers other than the Spring conference season which is often little more than a reiteration of the 4Q12 conference call content. 

      • We're more comfortably owning 15 to 20 names. We have some names in the portfolio that are pure plays on a single play and those may get tossed. 

      • Oil prices – as stated above, we don't see the big drop some are worried about. At the same time, quarter to date 1Q13 pricing has been better than expected and we while we don't see big declines (into the $70s or $60s we do think a pullback of smaller proportions may come hand in hand with a pullback in the broad market. 

      • So, profits and losses are worth taking at this point for us. 


        • We don't really care which in the sense that the market could care less what my cost basis is so why should I?

        • How much: probably 20 to 30% of total. That's my thinking and it may not at all be appropriate for you, consult your financial adviser.  We are not going to hit Core positions unless the name is getting completely punted. We plan to take some trading positions off the table in the names that have had extended runs soonish (later this month or upon earnings)

        • We're not calling a market top or a group top… we don't do that. We are just getting a little fire power ready. After all we added to positions for all of 2011 and 2012 (more net adds than net sales) and while we have additional cash reserves we could tap we don't want to. Not given the run. 

        • If the group / market continues to run higher, fine. Great in fact as we are overwhelmingly long. And if it pulls back and drags great stories like an OAS or a BCEI down with it 


          • Sidebar: Not for BCEI (note that we previously trimmed trading positions in BCEI in the upper $20s and lower $30s as it was running before much of the recent group run and while it remains a large position for us we probably won't prune it further back until its atop $40)
        • Anyway, don't surprised to see us do a little selling into further strength as the E&P part of earnings season really starts to kick into full swing over the next 3 weeks
  20. 20
    nrgyman Says:

    RE 19:  I remember this post well.  Helped to shape my thinking (and portfolio holdings).  We had a bit of a sell-off and come-back since then, but I'm still thinking we could see more correcting–consistent with your post.  
    Re 17:  You may be right.  Bulls may jump on the weak correction thinking "that's all you've got?" and move the market higher.  I'll be along for for the ride, but with a bigger cash position than normal.  I may be selling more of the big gainers if the market runs higher.  I have picked up some washed out names recently, however, and will continue to look for good values (and charts).
    Re 18:  Glad to help.  Hope it works for you.

  21. 21
    brodway Says:

    re: 19
    right on!!!
    always remember what you say, and keep that in the back of my mind. have made too many mistakes in the past not taking profits at the appropriate times and riding it out. this hurt me dearly in 2010, as i saw all of my profit and then some disappear later that year. the buy and hold strategy over the last 7-10 years hasn't worked that well. this years resolution was too keep tight controls and closely monitor these moves higher and lower and take better advantage of them to maximize profits. as a famous rapper says "mind on my money, money on my mind".

  22. 22
    brodway Says:

    "Anyway, don't surprised to see us do a little selling into further strength as the E&P part of earnings season really starts to kick into full swing over the next 3 weeks"
    sell on the news has really hurt me too. unfortunately, there aren't that many long term holders anymore. just too many folks who got hurt badly in the past  and take the chips off the table when the profit is there. as the markets stabilize going forward the mind set may change again and people will regain confidence in the buy and hold strategy, but for now buy on the rumor sell on the news is what seems to be working.  this years resolution is "if you can't beat them, join them."

  23. 23
    zman Says:

    Valuedigger out with a BCEI article. Another bit of ticker spam related nonsense. Says BCEI is overvalued, says to buy some  single digit midgets that he owns instead because, well, he owns them.  I won't bother to link his article here because frankly there's no actual analysis in it.  It will go ahead and make me write a counter in SA this week however. 

    Big earnings week ahead here, calendar will be out in the Monday post. 

    OEDV update piece in the hopper. 

  24. 24
    zman Says:

    re 22 – hear what you are saying but s you know I am much longer term than that. Sell on the news is a fine time to add. GDP chart good recent example. I am not long there but the impatience of those who were in simply for the well news provides opportunities for those with focus as the name gains traction on the sentiment side. 

  25. 25
    zman Says:

    We should get a pleasing to the eye TMS type curve out of GDP tomorrow. 

  26. 26
    Zorgnak Says:

    S&P Futs…
    Notes….Market reversed at 1496 CHVN and bounced through minor resistance at 1510.50 to above Minor CHVN at 1513.25. Supply dwindles above 1521 with little mkt structure above. Longer term breadth and demand volume supportive on dips. Short term demand positive on the intra-day correcting upward on the daily time frames. 9-13-9 DeMark weekly exhaustion sell  setup on weekly. Working on DeMarkTD9 sell setup on monthly.  $USD extended at top of 10 week range and major CLVN. POMO supportive through the end of Feb. POMO range swing trade closed for .98% gain on close Friday. 
    Thoughts …….  Buyers were still active at the 1496 CHVN. Scenario #1  Watching to see if buyers show up at 1513 CHVN once again for a retest of recent highs. If not, scenario #2 would be a choppy fall back into a wider range trade above major support at 1492. Short term upside bias above 1513. Intermediate upside bias above 1492. Little market structure above 1521. Market putting in longer term exhaustion setups on the weekly and monthly that can take weeks/months to play out. 
    CLVN=Low Volume Rejection Zone – CHVN= High Volume Price Acceptance and Congestion Zone-VPOC=Daily Most Accepted Price
    1521      End of supply/Little market structure above
    1513.50 Minor CHVN/Short term volume pivot
    1510.50 Minor CLVN/Support
    1496.25 CHVN/Volume Pivot/Low volume area below
    S&P Futures

  27. 27
    Zorgnak Says:

    Regained 58 support.  If the S&P Futs find buyers above 1513 I'd expect  XOP to move above support (58) to test recent highs around 60.  Above the XOP 60 level longer term supply begins to dwindle.  Another leg up wouldn't be surprising if the general market stays positive above 1513. 

  28. 28
    RB Says:

    BofA research cited in a Bloomberg article I can't link says that Saudi needs $80 oil to balance their budget, up from $50 in 2007….that is some pretty steep expansion in govt. spending eh…maybe the dollars aren't right but the % jump is what caught my eye…..

  29. 29
    RB Says:

    China HSBC PMI 50.4 for Feb. vs est. 52.2….

  30. 30
    john11 Says:

    Southwestern Energy (SWN) added and Noble Energy (NBL) removed from Conviction Buy List at Goldman Sachs

  31. 31
    zman Says:

    Thanks John,

    CRZO on the tape with strong reserve numbers. 

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