24 Winners in the "Blue Sky" Market
You won’t hear much pessimism from me, these days.
Other than the negative outlook on the U.S. dollar, pretty much everything else we see is surrounded with blue skies.
The American shale boom is the poster child for this “blue sky” thesis. Over the past five years we’ve seen a massive turnaround in the American economy. Rack some of the market-based gains to inflation fluff, but a large portion of America’s economic comeback sprouted roots from the energy boom.
That said, it’s only prudent to take a step back and wonder if a crash is, in fact, imminent…
Remember we’re not just resource hunters, here, we’re also traders. A gain in the hand is worth two in the bush, eh?
Any trader worth his salt knows how to play the ups and downs of the market – when the getting is good you “sell high” and when all hope is lost you step back in and “buy low.” That’s the most basic mantra of any good trader.
Just as good traders know how to buy low and sell high, they also know how to “let the winners run.”
Today we’ll take a look at some of our favorite picks. We’ll update where they’ve been since our first mention – plus, where they may be headed in the future.
Fact is, with the gains I’m seeing out of this bunch, some traders may think it’s time to take some money off the table. But as you’ll see, that may not be the best plan with this raging bull…
A little over a year ago I was kicking rocks in North Dakota’s oil-rich prairie land.
It’s funny, sometimes there are so many good investment ideas they just start hitting you in the face.
I passed a massive, brand new, oil storage container owned by Enbridge Energy Partners (EEP). I set foot on a rig owned and operated by Nabors Industries (NBR). I took pictures of hundreds of oil rail cars (owned by none other than BNSF — Warren Buffet’s company) lining up to transport the freshly produced crude. Even when I went to put my hotel key in the door, after a long day of site visits, I look over the my left and see a contractor lugging a plethora or yellow cases – the trademark yellow containers carry Trimble Navigation (TRMB) geo-tracking equipment used by many a resource hunter.
Enbridge, Nabors and Trimble, by the way, are posting solid double digit gains since that anecdotal message – 13%, 16% and 22% is nothing short of fantastic for off-the-cuff resource picks!
But that’s only part of the story.
Here’s a few other important takeaways to keep in mind:
Midstream is a must! – The U.S. shale boom is creating tons of opportunities in oil and gas, not the least of which is through “midstream” companies. These are the companies that gather, process and transport oil and gas.
Companies: DCP Midstream (DPM) up 12% since 10/23/12, Magellan Midstream (MMP) up 77% since 4/26/12, Access Midstream (ACMP) up 67% since 12/20/12, Plains All American Pipeline (PAA) up 15% sine 12/20/12, Williams Partners (WPZ) up 7% since 12/20/12, Enterprise Products (EPD) up 22% since 1/11/13 and Global Partners (GLP) up 33% since 1/11/2013.
The rail boom chugs along! – Along with midstream players we’re seeing a true resurgence in rail traffic. Whether trains are transporting standard goods or part of America’s new oil bounty, rail players and terminal owners are burning up the tracks!
Companies: Canadian National (CNI) up 10% sine 3/6/13, Union Pacific (UNP) up 11% since 4/3/13, Norfolk Southern (NSC) up 18% since 4/3/13, CSX Corp (CSX) up 11% since 4/3/13, Kansas City Southern (KSU) up 17% since 4/3/13 and Genesee & Wyoming (GWR) also up 17% since 4/3/13.
Fertilizer gains still growing! – With the use of America’s cheap and abundant natural gas as a feedstock, nitrogen fertilizer makers are achieving a global advantage on costs. Some pay a nice dividend to boot!
Companies: Terra Nitrogen (TNH) up 4% since 6/28/12 and CF Industries (CF) up 14% over the same time frame.
The race is on to become the “Next Exxon” – Now that the dust is starting to settle in the shale patch, it’s clear to see that “local” oil players are cashing in the most. These are the pure-play type companies that can cash in on sweet-spots and leverage efficiencies to turn a profit.
Companies: Pioneer Natural Resources (PXD) up 89% since 10/17/12, Oasis Petroleum (OAS) up 91% since 7/19/12, EOG Resources (EOG) up 59% since 10/22/12 and Marathon Oil (MRO) is about even since 9/23/13.
Keep an eye on “unconventional” gold and silver players! — Big gold producers have been a flop over the past few years – I’m looking at you Goldcorp, Barrick and Newmont! First they started diverging from the price of bullion – so even as the price of gold moved higher the big miners continued to fall! Second, after the price of gold pulled back earlier this year those big players fell even further.
I’m not turning a blind eye to these losses – over the past two years many big miners shed nearly half their value – but it’s important to note some of the other winning “unconventional” precious metals plays we’ve looked at…
Companies: Johnson Matthey (JMPLY) up 19% since 6/5/2013, Franco Nevada (FNV) up 29% since 4/17/13 and Hecla Mining (HL) by utilizing a buy/write strategy the position is up 18% since 7/11/13.
Add it all up and some savvy readers could be sitting on a lot of winners.
As I hinted above, a hot-streak like this will have some traders holding their hand right-close to the sell button. The market can only go up so far so fast – there’s got to be a pullback or crash waiting in the wings, right?
But just as good traders know how to buy low and sell high, they also know how to “let the winners run.”
Above, we’ve listed 24 winners, along with one company that’s unchanged, Marathon Oil. All together the list is averaging a 33% annualize gain (accounting for the varied timeframes.) It easily outpaces the mainstream markets on a yearly basis.
So do I think the market is going to crash? Is this list a little top-heavy?
For starters I’m a firm believer in letting your winners run, especially when there is blue sky as far as the eye can see.
Plus, as long as the Fed continues to spur the market along with more easy money – which analysts believe will happen all the way through March 2014 – then the companies listed above will have a stiff wind at their back.
Add it all up and this run could be one for the ages. Keep up the good work!
And don’t forget to keep your boots muddy,
Ed. Note: Finding winners in the current US energy boom is Matt’s specialty. And clearly, he’s good at it. But his colleague, Byron King has a few more tricks up his sleeve, and Matt relayed them to his Daily Resource Hunter email readers yesterday. If you didn’t get it, not to worry. You can sign up for FREE, right here, and start getting all of Matt’s incredible analysis (as well as several chances at real profit opportunities), every single day.
Original article posted on Daily Resource Hunter