RD's Picks

SLOport notes

Over the past few weeks I've written some bullish comments on Transocean (RIG), Graham (GHM), and Chevron (CVX). Those stocks have all had pretty decent runs over the recent past and I took some profits in all three on Friday.

I've been burned in this contest and in real life by failing to take profits, then watching as the stock drops back down and am trying to avoid that unhappy set of events. Of course, if I've sold early and they keep running, I'll miss out on some profits.

RIG was trading in the 130's a few weeks ago and closed Friday near 159. I still like the stock and the company and believe it will hit new highs before the year is out. I just thumbed through the annual report; rig demand is still high and dayrate projections are still climbing. But a 20% rise in one month is a little ambitious for any company. I sold two chunks on Friday, one near the open at 153 and one mid-day around 159. That took nearly half the position off the table.

GHM has had a monster run over the past few weeks. I really like this company, but 35 to 53 since the beginning of April is just begging to take some profit. My target on this one is mid-60's, so even though I really like the stock, I'm much more inclined to sell here than to buy more. Even after selling some, GHM is still one of my biggest SLO positions.

CVX has been more of a steady gainer, but the last time it was in the 90's, I held on and then watched it drop into the 70's - not fun. I've still got 500 shares in SLO, so even if I don't get a chance to buy the shares back I won't feel too bad about having missed profits on a piece of my original holdings.

In all three cases, I'm still positive on these stocks and am still holding enough to participate if the run-ups continue. If they pull back some, I'll buy the shares back. I just don't want to see nice profits turn into losses if I'm wrong.

I've been more aggressive with trading around a position in SLO than in real life, but am getting comfortable with the concept and plan on using it a little more. It sounds aggressive and risky, but when you think about it, taking some profits when you have them is a pretty conservative portfolio management approach. With low or free commissions, capturing even a small move is truly money in the bank and most stocks trade with enough volatility to make it work. Obviously, the strategy works best with cheap commissions and in something like an IRA account where you aren't getting hit with taxes on short term gains and don't have to worry about complicating your cost basis.

Guess I'll have to do some research on WaMu this weekend and weigh in on the QOTW since I've been spouting opinions on banks lately.

Also noticed my friend duffbeer snuck into the top five. Duff - when are you gonna open some cold ones and share your stock picking magic??

Disclosure: At time of writing, I own shares in RIG, GHM and CVX and wish I'd have bought a lot more of each.

Comments: View Comments | Friday April 18, 2008

Archive Comments (1)

'Hustlle' Rus-SELL,

One of the reasons for RIG's recent performance is the visibility and predictability of earnings in Uncertain Times.
Gun-shy Players are looking for " Safe Havens" and Security. RIG has long-term contracts and spins out
CashFlow like Nobody's business.
RIG recently did a ( more or less ) accretive Take-Over of Global Santa Fe ( formerly GSF : NYSE ).
I owneed GSF and got cash and RIG stock when the deal went down. At the time it was estimated that RIG
could re-pay the merger costs with 3 years of cash flow if they didn't commit cash to any new Investments.

The Point : The market forgot to build-in the Synergies and so forth.

There is also a Catalyst : Mexico relies heavily on PEMEX ( the national oil company ) for their revenues & economy..
In recent years, PEMEX money was syphoned off for Social Programs, etc. Mexican Oil production is dwindling to a
trickle and the Mex Gov't is in a state of CRISIS. They are debating on whether or not to allow direct foreign investment
to help fund Exploration and Production. Maybe even new refinery JV's. This would wound National Pride,
which is strong there. In any case, there will be a lot more drilling in the Gulf of Mexico & The Bay of Campeche
and more demand for off-shore and deep drilling. Two Force Five Hurricanes hit the Yucatan last summer &
some production was shut in when the off-shore platforms had to be abandoned for a while.
This was a severe blow to Mexican oil production and high-lighted the need for more investment.
How about the new finds in Cuban and Australian ( BHP ) waters ?

I like Chevron. It's an Integrated International Major Oil Company which has a nice Dividend.
What's so Bad about that ? They have their own oil production as well in more or less politically
stable places ( USA excepted. Not SO ?? )

The "Kicker" for me is CVX's wholly-owned Mining Subsidiary -
They've got Coal and they are BIG in Moly ( Molybdenum ).
SEE article :
http://www.usitoday.com/article_view.asp?ArticleID=NR2019

http://www.usitoday.com/article_view.asp?ArticleID=NR2019

Their Rare Earth Mine in Mountain Pass, CA is the real KatalystiK KicK -
Rare Earths are ALL Strategic Metals and China has a death grip on production -
97% of the world's supply. The Mountain Pass mine will be the only source of
Rare Earths produced domestically. The mine was shut down many years ago
when rare earth demand for Neodymium for magnets, Europium an Ytterrium for
Compact fluorescent Light bulbs and such was Non-existent. It was kept down
due to Mining Hazard ( Radioactive Thorium ) and Environmental problems
( waste and run-off from a time before pollution was an issue ).
Anyway, Mountain Pass is opening soon -- they are even now advertising for
technical help on the internet. National Security beckons and demands that this facility
be brought On-Line ( note the Punny PhUnny )

http://geology.csupomona.edu/drjessey/fieldtrips/mtp/mtnpass.htm

As for DuffBeer -- He won't Blog -- He Fears the Flack, Jack.
As a stockpicker, he should get a job driving Heavy Equipment in Mountain Pass, CA
Do you think the SLO-2 #2 Super "Stupor" Trooper could Mountain Pass a Sobriety Test ??
http://www.indeed.com/q-Heavy-Equipment-Operator-l-Mountain-Pass-California-jobs.html

http://www.indeed.com/q-Heavy-Equipment-Operator-l-Mountain-Pass-California-jobs.html

I think DuffBeer uses an "ImProbabilty" drive from " Life, the Universe and Everything "
He also found the 'Marble' from MIB II around a dog's collar;
it contains an entire Galaxy and he's keepimg it in the bottom of a Bottle of BUD.
Don't tell Mrs. DuffBeer about the Coyote Ugly Collared dog that he met at a BAR.
Ok.

Don L. Ferk

PS : The ONLY answer to DuffBeer being in the Top 5 is to Drink Heavily -
Newbies BeWare - It's an OLD SLO " Family Tradition "

Song O' da Day
Family Tradition = Hank Williams Jr.
http://youtube.com/watch?v=wyDie_4dOdU

http://youtube.com/watch?v=wyDie_4dOdU

Posted by don ferk April 19, 2008 4:16 PM

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