|Written by GSCR Staff|
|Tuesday, 26 November 2013 08:00|
In yesterday’s Goldman Guide we discussed three ways the Federal Government may ruin this great bull market we are currently enjoying.
One of these was the pending Iran nuclear deal that was announced yesterday. Trusting oppressive regimes has never paid off in the past and probably will not here.
Yesterday all of the market networks had the talking heads giving advice on how to ‘trade the Iran deal’. Some of the bulls were acting as if loosening the economic restrictions on Iran will create a new China with an opportunity for double digit growth, which is ridiculous. Make sure not to get into the herd mentality here, as there is still a long way to go until the Iran economy represents a great opportunity for investors.
One of the expressed long term goals of the Obama administration related to the deal is to further decrease our dependence on foreign oil. Maybe someone should tell the President to call off the attack dogs of the EPA when it comes to natural gas and approve the Keystone XL pipeline, but we digress. Everyone might be jumping on U.S. oil and gas stocks in the short term. Treat this sector like any other and keep the big picture in mind while using the same parameters when picking other stocks.
Speaking of our oil picks, back in July we highlighted Hercules Offshore, Inc. (NASDAQ – HERO - $6.35) which is currently in the red, down close to 16% since then. The stock has been a roller coaster since then, basically following the price of oil. The technical analysis does not paint a good picture, giving a very bearish signal all the way out to the 50 day DMA. Additionally, HERO has dropped over 18% on very heavy volume averaging 2.5 million shares traded per day over the last three months. On the bright side, the Company is forecast to bring in over $1.1 billion in revenue for 2014 putting the forward P/E at a very attractive 8.5. We think a longer term approach here may be in line for HERO, despite the sell-off yesterday. The stock may get back up to the $8 level in early 2014.
Additionally, if you are on the lookout for a long term inexpensive oil play, look to the up and coming Bakken as an alternative to drilling and offshore plays that even some environmentalists are supporting. Some experts estimate that there are 24 billion barrels of oil in the Bakken corridor of Montana, North Dakota, South Dakota, Saskatchewan, and Manitoba. Double Eagle Petroleum Company (NASDAQ – DBLE - $2.18) is a solid, undervalued longer term play for a foray into this market and traditional oil and gas. With expected revenue increase of 18% to $52 million in 2014 the forward 12-month P/E is under 2! The Company has had two straight quarters in the black related to EPS and if the trend continues the stock could triple sometime in 2Q14.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com