BLACK PACIFIC CAPITAL
|Posted on 13 December, 2015 at 21:45|
Weekly Market Assessment
Oil... the black blood that runs through the veins of our modern global energy system. It's the dominant source of energy however, its future supply is uncertain. In the coming weeks, I plan to focus my weekly assessments to one particular subject that has no doubt become extremely interesting, nerve racking and nevertheless important to me, crude oil. I will look at supply and demand and the problems that come with trying to explain how difficult it is to measure the two. What is the current demand and what is the current supply? The "missing barrels" saga. The shale revolution and its impact on the global supply of crude. I will investigate major investors and analyst that have bet long or short on the crude market over the past 25+ years; geopolitics in the Middle East and trading routes that affect oil supplies, and how current oil prices affects the future drilling plans. I want to unravel the huge cut in capital expenditures by oil companies, the collapse in the international and domestic rig count and the phenomenon of oil decline rates. All of these topics and more should layout my case and hopefully, in a simplistic way, illustrate why I am buying oil stocks and more specifically, exploration and production companies or more commonly know as drilling companies. Crude oil has fallen to levels not seen since the recession in 2009 and seems to be approaching levels not seen since early 2004. In less than a year, crude has dropped from $104 a barrel to ~$36 a barrel. Like all other times in the past, crude falls off a cliff and then rebounds to new higher prices that were not expected by the market. Is this fall in oil different?
Let me keep it simple in answering such question...No! I have started another fund that is going to track energy and energy related stocks throughout the next year. Huge blue chip companies are on sale and CEO's have expressed that their dividends are safe. This provides an unbelievable opportunity to be able to capture yield in a low yield environment, which has been created by quantative easing and the Federal Reserve's low rate policy. Is there risk in investing in a stock that is directly correlated to a falling commodity, absolutely! However, unlike most other commodities this is a finite resource that is in constant decline and requires billions of dollars in investment to substitute the loses and for now, all major developed and underdeveloped countries need it to function. Have we reached a bottom? Many say yes while others say it's going to be lower for longer. One thing is for sure, the longer we remain at these extremely depressed levels, the higher the future price of oil will be due to the lack of current investment. As of recently, we have seen crude oil make new lows while energy specific stocks have not. This is a small sign of divergence. Nevertheless, it might be worth a look or two. So from here forward, I hope I can paint a bright and lively enough picture of my outlook on the oil market. I'm investing in the most hated sector in the market buuuuuut, one of the most important commodities in the world.
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
See What I'm Trading:You can now view all my real-time trades by following this link, BlackPacific Capital1. This new site shows my trades, in real time the minute they are bought and sold. Below you can also click on the stock symbols, trade strategy or prices which will lead you to this new site. The site offers a full risk/return profile and video detailing the strategy of the trade. Note: When looking at the option positions every contract equals 100 shares.
BlackPacific Capital has created three funds. The first is the Total Return Fund and the other is the Growth Fund. Both of these funds will be compared against the S&P 500. Both will hold a total of no more than five companies each. The Total Return Fund is a low turnover fund where every holding must have a dividend and be undervalued to its peers. The growth fund is made up of momentum high growth stocks where the turnover rate is much higher. Below are their Weekly and Year to Date returns. For more information and to see the holdings in each fund click here.
New holdings and liquidated positions: I am still looking for a stock to add to the Growth Fund after selling out of NetFlix. In the Total Return Fund, AIG paid out a dividend of $0.28 per share. I have opened two positions in the Energy Fund with an entry price in BP at $31.75, while locking in a dividend yield at 7.5% and ConocoPhillips at $49.50 and locking in a dividend at 6%.
S&P 500 Return
Year to Date: -2.05%
Total Return Fund Return
Year to Date: -3.32%
Year to Date: 7.59%
Year to Date:-2.87%
Categories: Weekly Market Assessment