Saturday, May 14, 2005

It's wabbit season. (almost..)

Energy related stocks plunged this week. Did it have something to do with forced hedge fund selling? I'd guess that was probably a piece of it.

Quote from link above:

Hedge funds -- those again -- were believed to be taking large positions. Perhaps it was no coincidence that the price of oil dropped drastically this week at the same time that noises about hedge funds losses circulated. Hedge fund managers, bound by promises to wealthy investors to deliver above average returns, also were rumored to be unloading rich positions in energy and materials to meet their redemptions. Other rumors had funds taking huge losses on steel. No one knows for sure.

Or was it just the seasonal weakness in oil prices (+ many other posts predicting this, read back through archive) we've been hearing about?

Is it time to step up to the plate and buy? Maybe soon..

Analysts see more upside in oil stocks.

Quotes from article linked above:

Jacques Rousseau, an oil and gas analyst at Friedman, Billings, Ramsey, is bullish on the integrated oils because their "sustainable earnings power is a lot higher than people give them credit for."

He predicted 15 to 20% upside in the group's share prices over the next 12 months. He recommended that new investors wait until around June to buy into the group in order to get through the season of bearish U.S. supply data, and long-term investors to hold their shares.

"As long as consumption is growing the stocks will do fine," he said. "There's not enough supply to end the energy story."

I think this chart of historical whale oil prices gives us guidance on what we may experience with crude oil, so you have to be prepared for those sharp up and down moves. And if you're nimble, you may be able to take advantage of them.

(Graph from link on DailyKos. The associated article is also good.)