Here is a quote from a May 15th, 2006 post-"Investors Selling Anything That Made Money".
I wrote;
The majority of the profit taking we are witnessing is concentrated in stocks that had the biggest gains. If you have been paying close attention, the biggest hits in the market were concentrated among energy, commodities, and the metals.
Basically what we are seeing is more of the same since Mutual Funds and many institutions close their books for accounting purposes during the September-October time-frame. So, in order to take gains, and show profits or decent performance numbers, institutions sell stocks with the largest gains to justify their fee's and money management services. I guess we can call this window dressing season.
There will be a different landscape once we emerge from this quarter of window dressing.
In May, anything energy, commodity, or metal related was sold and then bought right back. This time around may be different. I think that the smart money will be more selective with energy, and will take more time when buying back commodities and the metals.
On the energy side, I think the large integrated such as XOM, BP, and CVX will be in the dog house on concerns over their reserves. You will probably see these companies cut, or fess up to the fact that geopolitical issues have lowered the amount of oil they have been reporting as reserves.
The integrateds that are attractive takeovers will be stocks like MRO, SUN, and possibly COP.
The refining stocks are a totally different story. Regardless of geopolitical or reserve issues, refining remains a concern because of the shortage of refining capacity. So stocks like VLO are attractive and will probably be among the first stocks to be bought back after this quarters window dressing.
Ideally, I would like to buy VLO again under $50. It may get there, and it may not. The best appraoch from here is to build back a position in the stock in stages, here, and a little lower.
Other Energy Stocks I'm Interested In
CNQ- Canadian Natural Resources: Independent energy company engaged in the acquisition, exploration, development, production, marketing and sale of crude oil, natural gas liquids and natural gas. The Company operates in western Canada, North Sea and offshore West Africa.
SU- Suncor Energy: Integrated Canadian energy company. Explore for, acquire, develop, produce and market crude oil and natural gas, transport and refine crude oil and market petroleum and petrochemical products.
BTU- Peabody Energy: A private-sector coal company that owns, through its subsidiaries, majority interests in 34 coal operations located throughout all major U.S. coal producing regions and in Australia.
ECA- Encana: Independent crude oil and natural gas exploration and production company. Operates under two main divisions: Upstream (manages exploration, development and production) and Midstream & Marketing (gas storage and market optimization activities).
Commodity Stocks I am Interested In
Ideally, we would like to buy these stocks after the final shoe drops. The final shoe to drop is news that China has entered a slowdown in economic growth. I think we will see this happen, but maybe not until the 1st or 2nd quarter of 2007.
I realize its tough being patient, but often patients can be very rewarding.
RTP- Rio Tinto plc: An international mining group, combining Rio Tinto plc and Rio Tinto Limited. The Company's principal product and global support groups are Iron Ore, Energy, Industrial Minerals, Aluminium, Copper, Diamonds, Exploration and Technology.
BUCY- Bucyrus International: Designs, manufactures and markets draglines, electric mining shovels and rotary blasthole drills used for surface mining and provides the aftermarket replacement parts and service for these machines.
ACH- Aluminum Corporation of China: bauxite mining, the production of alumina, primary aluminum and ancillary products, and provision of engineering and construction services.
PCU- Southern Copper: an integrated producer of copper molybdenum, zinc and silver, operates mining, smelting and refining facilities in Peru and Mexico and they conduct exploration activities in those countries and Chile.
TCK- Teck Cominco: Diversified mining,smelting & refining company.
AL- Alcan: include bauxite mining, alumina refining, production of specialty alumina, aluminum smelting, manufacturing and recycling, flexible and specialty packaging.
AA- Alcoa: A Producer of primary aluminum, fabricated aluminum, and alumina, and is active in all major aspects of the industry: technology, mining, refining, smelting, fabricating, and recycling.
POT- Potash Corporation: Large integrated fertilizer and related industrial and feed products company. The Company supplies potash, phosphate and nitrogen to the following market categories: agriculture, animal nutrition and industrial chemicals.
CCJ- Cameco: Produces and mines for uranium for nuclear use. The company is also a commercial converter of uranium concentrates to uranium hexafluoride and commercial supplier of services to convert uranium concentrates to uranium dioxide.
MON- Monsanto: A global provider of agricultural products for farmers. They produce seed brands, including DEKALB, Asgrow, Seminis and Stoneville, and they develop biotechnology traits that assist farmers in controlling insects and weeds.
ADM- Archer Daniels Midland: Engaged in procuring, transporting, storing, processing and merchandising agricultural commodities and products. Operations are classified into three reportable business segments: Oilseeds Processing, Corn Processing, and Agricultural Services.
