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The Oil Addiction

Friday, February 12th, 2010

During a recent segment of Jim Cramer’s Mad Money which aired on Feb 1st, he highlighted Natural Gas. Jim interviewed CEO of EQT Murray Gerber. EQT is a 120-year-old company based out of Pittsburgh, PA, that drills natural gas in the Appalachian basin. EQT trades on the NYSE and as of the close on Feb 11, 2010 its closing stock price was 42.01, which is down YTD approximately 5%.

Cramer stated that he felt natural gas was a great oil alternative and didn’t understand why it doesn’t get more attention in America’s efforts to reduce her dependence on foreign oil sources. Cramer went so far to say that “If you are not for natural gas, then you are for buying foreign oil,” and I would have to agree. According to many natural gas experts America has at least 125 years of supply. T. Boone Pickens is probably the most notable leader in this alternative/transition energy phase. He states that “America is the Saudi Arabia of natural gas.”

Clearly the United States has been addicted to oil for quite some time. It is a hard addiction to shake! You would think that the 70’s oil embargoes, the Iran crisis in the late 70’s, and exponential price increases in 2008 would motivate the country to check into oil detox programs immediately. But just like any junkie, we still continue to look for our oil fix.

Natural gas prices are approximately $5.35 per MMBTU (10,000 million British Thermal Units) versus oil’s $73 a barrel. It is cleaner and cheaper then oil, so you would think the natural order of supply and demand theory would easily introduce natural gas as a better substitute and increase its overall usage throughout the country’s entire energy mix. But since this natural order has been disturbed, could possible mean that some outside force has interrupted this process, perhaps a political one, supported by a strong lobbyist organization?

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Posted in Mad Money Recap, TheStreet.com | 1 Comment »

Emerging Markets an Attractive Opportunity in 2010 for Wise Traders

Friday, February 12th, 2010

Market fundamentals still indicate a very bullish 2010 forecast for selected emerging markets, which is backed up by a country by country analysis here.

For instance, recently the World Bank raised its growth forecast in China for 2010. The strength of regions like China and Latin America really was crucial to powering through the worst of this worldwide economic downturn. The collective spending power of this ever growing middle class in these emerging markets is immense and should be very profitable in 2010.

Some emerging market stocks that look really good for 2010 include American Tower (AMT), CNOOC (CEO) and even multi-national companies such as McDonalds (MCD) and Coca-Cola (KO) look like very attractive buys for 2010. There is also a very good exchange traded fund like the iShares Emerging Market Trust (EEM), which is a way to participate in the strength of some of these emerging market powerhouses without incurring some of the volatility that sometimes comes with individual issues.

Trading Tips for Taking Advantage of this Opportunity

Of course these stocks and ETFs can be purchased to capture the predicted bullish opportunity. However, one of my key trading tips is to employ options and get a far bigger bang for your buck. You can buy a bullish long-term call for far less than purchasing the underlying.

In addition, you can reduce the outlay even more by using a long-term bull call spread. By selling a further out strike call you can reduce what you had to pay for the lower strike call. Finally, if you do decide to purchase the underlying stock or ETF then consider selling a long-term out-of-the-money call to enhance your overall returns.

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Posted in 2010 and Beyond | 5 Comments »

Cramer’s Jolly Retail Report is a Bit Ho-Ho-Hum

Sunday, December 13th, 2009

On last Thursday’s Mad Money episode, Jim Cramer sang the praises of the retail sector, telling viewers “the prevailing wisdom on Wall Street is just too negative”. While I agree that there is some truth to that, I don’t think the bulls are loose either. And an even bigger issue is the way many of the “iconic” brands that Cramer likes do business. Some of these change-resistant corporations have been slow to update their business models. But I think that the post-recession consumer market will dictate some changes to how retailers stay profitable and unless these companies adjust, they could be in big trouble.

Cramer and I see eye to eye on the housing sector. Thanks to the first time homebuyer’s credit, many consumers bought homes this year. Along with a new house comes a desire to fix it up and the trend toward home improvement has been clearly seen through the performance of a few of Cramer’s picks. Sherwin-Williams (NYSE:SHW) has performed well for the year, even during the recession. And Home Depot (NYSE:HD) and Masco (NYSE:MAS) have done very well, both posting gains of more than 20 percent for the year. As the recession eases, I fully expect these stocks will continue to rise, as does Cramer.

On the other hand, Cramer likes retailers. Even the bloated, old-fashioned ones like Macy’s (NYSE:M). I think Macy’s is a disaster. The company is up 55 percent for the year, but it’s still only trading at around half of its year-high. And that’s with the retail season in full swing. Cramer also likes Target (NYSE:TGT), which is up substantially for the year and has almost recovered its trading high. Target definitely looks better than Macy’s to me, but the problem for both of these stores is that what’s saving them right now are their lesser-known housewares segments, while their main product departments have gone stagnant. Macy’s apparel is staying firmly on the shelf and, as Wal-Mart improves its product lines, Target has been steadily losing its appeal to mass-retailer audiences.

Online retailers, though, like Amazon (NASDAQ:AMZN) and Overstock.com (NASDAQ:OSTK) are doing great. With the rise of Cyber Monday, I think that consumers will increasingly turn to the ease, convenience and comfort of online shopping. If so, I expect that online retail stocks will be on the upswing for some time.

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Cramer’s position on tech a smart stance

Sunday, December 13th, 2009

On last Wednesday’s episode of Mad Money, Jim Cramer spent a little time talking tech stocks. Due to a slight pullback, some analysts were concerned that another tech bubble was going burst. Cramer, however, saw it differently and recommended that his viewers take advantage by buying in. In making his picks, I think Cramer definitely got it right.

It’s true that Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Google (NASDAQ:GOOG) took a little bit of a dip lately. But, these stocks are all trading around their year-highs and they have all increased exponentially over the past year. They are also all trading at very high levels compared to more classically-modeled companies. So, a slight decline on these will naturally look bad, since they have so far to fall. But, these corrections are no different in percentage than other sectors have been experiencing. All three of these companies have shown a willingness to adapt to the changing marketplace, and because of that, I think they will continue to be profitable for some time.

Almost ten years after the dot-com bubble, some traders are still wary of tech stocks. But, I think the market’s a little wiser as a result of the internet crash. Instead of every tech company being viewed as an instant money machine, a few well-managed corporations have risen to the top, just as in other sectors. So the risk of another catastrophic implosion is much smaller. Cramer wisely advises investors to use tech stock dips like this to venture into the waters. I think this is an excellent idea. Since tech is somewhat volatile, a savvy buyer who jumps in while the water’s warm can become profitable rather quickly.

Let’s not kid ourselves. Technology is not going anywhere anytime soon and our dependence on it is, in fact, growing by the year. If you’re a trader looking for a relatively stable investment strategy, don’t fear the tech sector. Now that the initial internet hysteria has calmed down, tech stocks are maturing into a safe, long-term investing vehicle.

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