Maybe a Pine Tree

Ahknaten -- R.E.P. TSO

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Someone out there is bound to criticize how I value energy companies. They're going to talk to me about oil reserves and potential finds, and mention upstream and downstream, how oil should be at $150 or $70, biofuels that cause hunger, and how they like DIG DUG. Someone is going to point out that I'm going to talk about a company that is in my portfolio and someone is sure to notice that I have a large position in one of those companies. Some may even realize that I need to sell that particular position at some point to diversify a bit, as 24% in one position is way too large. Then, perhaps I'll complain about an energy company and it'll remind me of the time I complained of FXEN (down -150% with respect to the XLE) and how the Yahoo message boards lit up and attacked me personally. Oh, sometimes I'm wrong, sometimes I'm right, this is just an opinion folks.

So, I'm going to talk about two stocks - TSO and REP, and I'm going to do the usual arrangement on those stocks that I like to do.

REP - Long

Yesterday was a nice day for REP (up 17%) on news that the oil field they have interests in, has significantly more oil than previously expected, and that they might get acquired by China National Petroleum Corp. Cool. That sure helped out my portfolio. My initial position in REP was placed as it had the value story (low PE, price/book), the quality story (low accruals, F-score), few analysts, a growth story, and when I did a valuation of it in eVal I got a price of about $28 Euros ($44 USD). Oh wow, with the momentum today, perhaps some analysts will choose to cover it now and look super smart. Long on REP, but perhaps I'll start selling some soon.

TSO - Short

Today wasn't so bad for TSO, but it wasn't great. Not so cool. I have held TSO at some point, but not anymore. It has somewhat of a value story (low PE, price/book), and although I get a valuation of $42, the quality story isn't great (high f-score, high accruals), and after seeing the last quarter's EPS numbers the growth story isn't all that great either. The stock could be a 'value trap', and so I'll stay away for now. TSO makes me nervous - short.