Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - 30th Mar 15
Economic Recovery, Geopolitics and Detergents - 30th Mar 15
U.S. Dollar, Commodities and the Gold Miners GDXJ ETF Analysis - 30th Mar 15
Stock Market Short-term Downtrend - 30th Mar 15
David Cameron Election 2015 Debate Facts Check - Employment, Immigration, Debt & Deficit - 29th Mar 15
Stock Market About Ready to Crash! - 29th Mar 15
Reflections in a Golden Eye - Gold Market Rejection, Repatriation and Redemption - 28th Mar 15
Stock Market Inflection Point - 28th Mar 15
Gold And Silver - What Moved Price? Bab el-Mandeb And Uranus Square Pluto. What?! - 28th Mar 15
Stock Market Investment Parachutes; Do You Have Yours? - 28th Mar 15
Peak Gold Misunderstanding, is Gold About to Run Out? - 28th Mar 15
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
old Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

Now Is The Time to Buy These Oil Refiners and Coal Stocks

Companies / Resources Investing Dec 18, 2012 - 09:30 AM GMT

By: Money_Morning

Companies

Dr. Kent Moors writes: Without fail, every year there are January surprises.

They occur when investors receive a pop in selected stocks because of the way fund managers readjust their holdings to dress up their fourth quarter performance.


These improvements don't usually last very long.

In fact, most investors will see the affected stocks decline back to normal levels by mid- to late-January.

But for a few weeks, investors can earn a nice little return as the calendar begins the New Year. This hedge-fund effect will be of special interest to energy investors in 2013.

That's in stark contrast to last year when oil-related stocks were moving in one direction while natural gas stocks were moving in another. What's more, service companies were beginning to come off of their highs at this point in 2011, and King Coal was about to fall off a cliff of its own.

This time around, we have a fiscal cliff soap opera in the U.S., continuing credit concerns in Europe (although with a parallel rise in market optimism emerging on the continent), rising uncertainty again in the Middle East, and a simmering dispute between Japan and China.

In short, even ignoring the Mayans and their approaching December 21 deadline, there is no lack of concern in the market these days.

Still, there will be several beneficiaries in the energy sector as hedge fund managers make their moves over the next few weeks. This is likely to happen across several categories of companies.

In this case, investors would be wise emphasize two segments of the energy market that are currently on the rise: oil refineries and coal stocks.

In each case, the rise prompted by fund managers is not likely to last into February. However, in the case of these shares, we will see a rise resulting from market forces themselves.

That means the extra pop from a January surprise is not likely to be followed by a drop-off.

Going Long Oil Refiners and Coal Stocks
The first category are oil refineries that have a diversified regional impact and sufficient refining capacity to address both light (high octane gasoline and early processing cuts like naptha and liquid petroleum gas) and middle (diesel, high-end kerosene - actually jet fuel, and low sulfur content heating oil) distillates.

Now refineries have been performing quite well even without the help of the fund managers.

As my subscribers to Energy Advantage well know, companies like Valero Energy (NYSE: VLO) and Western Refining (NYSE: WNR) have been doing quite nicely over the past six weeks.

Both VLO and WNR have been adding strength to the EA Portfolio and are prime candidates for January surprise material.

The second category is not one I would have selected a few months ago.

But certain coal sector stocks have attracted the attention of the funds due to an upward pressure on share value this month. Two primary stocks of interest here are Peabody Energy (NYSE: BTU) and Cliffs Natural Resources (NYSE: CLF).

BTU is up 6% and CLF up 19.44% since December 3.

Each stock hit its most recent low on that date after it traded considerably above that level earlier in the quarter. December 3rd appears to have represented an initial strike point for interest from some fund managers in these shares, a move that has increased since then.

Here's How to Play It
All of the refiners and coal stocks mentioned are likely to improve in price through the first part of January.

However, by around January 15, the trajectories should change.

Refiners like VLO and WNR will continue to appreciate, albeit at perhaps slower increments than over the past month. These shares, therefore, are better candidates for longer-term holds.

When it comes to the coal stocks, the prospects are a bit different.

While the demand for metallurgical grade coal (the coal needed for the production of steel) will continue at current levels or slightly better, overall coal demand should begin to decline.

In past years, the onset of the winter months would suggest a continuing need for power and heating fuel. That may continue to be the case in certain regions of the U.S. where coal continues to be the main source of fuel. However, that is no longer the case across the board.

Now, the increasing reliance on natural gas as the fuel of choice for electricity and thermal generation will blunt the normal move to coal during the winter season.

Therefore, BTU and CLF appear to be good candidates for sale in January (when the somewhat artificial bump from the managers has worked its way through the market).

A basic suggestion on these two would be a lightening of half your position half way through January and selling the remainder by the end of the month.

An unusually cold January may prolong the upward bias for either stock a little longer, but it is not going to change the overall decline as the first quarter moves along.

Either way, the start of the New Year should be fruitful for energy investors in two sectors.

Editor's Note: If you want to know the full story on how the energy markets really work, and what stocks Kent is recommending right now as January 1 approaches, click here to see this eye-opening presentation.

Source :http://moneymorning.com/2012/12/18/now-is-the-time-to-buy-these-oil-refiners-and-coal-stocks/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014