Listen to me: oil will destroy you if you allow it. Stop trading in and out of 3x ETFs, churning and burning your bullshit accounts into oblivion. Be a gentleman, own shares of SLCA and WFT, for the win of course.
There are many ways to skin this season cat. Firstly, let’s state it plainly, I am long oil through March. For some of you rocket scientists out there, that means I am going to be long crude stocks no matter what, even if Saudi Arabia decided to give it away for free.
While it’s true, in recent weeks I’ve reduced and eliminated several oil positions. Just yesterday I sold out of PACD. The simple fact of the matter is, I am playing a game of shadows, ebbing and flowing between overweight and equal weight the sector. Yesterday I sold an outlier position to raise funds to buy more QIWI. I did this because I am big man and like to eat salmon steaks on beach with champagne.
My core oil positions are WFT and SLCA. When oil turns up again, both of those stocks are going to blow brains out to the upside.
Note: I added to my WFT position today.
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Dollar breakout a concern?
The dollar has been breaking out forever. This is a seasonal play.
SLCA not backing down despite their earnings “miss” I like em!
Stock doesn’t give a shit.
The difference is in the amount of sand that each company has contracted for future dates. SLCA and HCLP did a great job of selling most of their future production at set prices (real good prices I might add.) Don’t quote me on these numbers because I researched these companies and invested in them but sold them a couple days before Saudi Arabia decided not to become the swing producer (it was on Thanksgiving day.) I felt before going into that meeting the risk/reward wasn’t worth it, no matter what the outcome was. After Saudi Arabia’s decision I shorted oil and oil related stocks with a vengeance. So this research is about 5 months old and mostly from recollection, but I think slca and hclp have somewhere around 80% of their future frac sand already spoken for, whereas FMSA only has 30%. That is the main difference in this business climate. Also, Slca has damn good infrastructure when it comes to the logistics of actually getting the sand into railcars to transport to the oil producers.
In the real world companies will honor their contracts with HCLP, SLCA, and FMSA if they haven’t already. Some of the shale companies are hurting real bad and have already been on their way to blow their banker in hopes of increasing their credit line. Collecting on accounts receivable could become challenging assuming these oil prices hold. In the real world HCLP and SLCA has the least amount of sensitivity when it comes to lower frac sand prices and lower demand for their products since about 80% of the sand is spoken for. FMSA really blew the bag when it came forward contracting.
SLCA and HCLP are the best plays here in this type of environment because of their long term contracts. If we were still in boom times or return to boom times with higher frac sand prices, fmsa will benefit more because they will be able to capture higher sand fracking prices. Consider FMSA as junk in this market because they don’t have much of their future sand production sold. They have 70% of their sand without contracts so they will be hit the hardest if this downturn continues. If you believe the oil markets will return to boom times like nothing has ever happened then go ahead and speculate, but even slca and hclp will go up a lot too with less risk to boot.
Personally, until I see production cuts I believe this bounce in oil and oil related stocks is more technical in nature than anything else. Oil supplies haven’t been this high since the 1930’s and we still have no end in sight to the ever rising production of oil. At the same time oil demand is not making up for the oversupply in oil. I read Le Fly has talked about seasonal factors which could also be at play here. Also a lot of the demand has come from investors buying oil now to sell it at a higher price in the future. The futures market in oil will be a thing to keep an eye on, if they start going down that will put pressure on spot prices because it won’t be as profitable to store oil anymore. This is just the way I understand things, but I am no expert when it comes to the oil markets. Of course any serious disruptions to our oil supply from geopolitical risks could change the dynamics of the oil market overnight.
I would highly suggest doing your own research because these numbers are over 5 months old and you should be doing your own research anyways. The 4 main frac sand companies to looking into are SLCA, HCLP, EMES, and FMSA. Good luck and be damn careful.
For The Fly – I went back and read about 200 pages of your posts from 2008-2009 to see how you fared during the collapse. First I want to say that you did one hell of a job so congratulations. It took me about a week to read but it was splendid reading so thanks for blogging and sharing in your exploits. I am not sure how much you remember from 2008-2009 but you went short the market at the beginning of 08 and did wonderful. However there was a spring rally and you gave back most of your gains. You were not happy to say the least and couldn’t believe the stupidity of the markets. However, you were ultimately proven right because I think it was April when the markets finally started to break. This reminds me of this oil rally too, the fundamentals are simply not there for higher oil prices. No one is cutting productions and Saudi Arabia vows not to cut production. Every bottom feeder in the world is still trying to pick a bottom in oil and that is not what makes bottom (usually.) There still isn’t any fear with investors when it comes to buying oil stocks when there should be due to the horrendous fundamentals in the market, just like in March and April of 2008.
United States (and Canada to a lesser extent) has now become the swing producer so the production cuts will fall upon us. There aren’t companies or countries that are cutting production, and I believe the weakest companies will have to increase production to make up for the falling price of oil. I covered all my initial oil shorts long ago and have since shorted them again a little while ago because they were overbought with USO as my biggest short of the 3. The other 2 etf’s that I am short are XOP and XLE. USO naturally loses value over time and will go down if oil goes down, whereas oil stocks might not necessarily go down. These 3 positions only make up 8% of my portfolio so it is still a small bet, but when I had conviction after the Saudi’s decision in November; almost half of my portfolio was short oil then.
Wow that chart looks good.
why SLCA over FMSA? the latter would seem to have significantly more upside. also has quite the short position to be squeezed thru.
slca is real
Carl Jankowski, former CEO of Palm Inc was on CNBC at noon. Carl thought we were on the edges of a tech bubble, Apple was losing some capacity to innovate, and social media was a fad.
I agree with Carl, who appears to be a truly forthright and honest man.
There is only so much ad revenue. Ads depend on people buying stuff. People buying stuff is pretty much the economy. The economy doesn’t justify the amount of ad revenue, maybe.
lot of promise in the PWR chart. Quanta provides nat gag and electric power infrastructure services so it is also hedged to a degree vs. other oil service plays. Been looking at WFT though, will pick up some at the end of the day if it breaks closer to 12.
but you will burn inside the oil barrel, at least until april-may-ish when the rig count finally bottoms out.
i’d like to join you around 30-40 ; )
YEAH BABY!! UP over 100% on EYES!! bought in the 8’s sold in the 15’s FUCK YEAH!! I needed that!! up over 400K this week
WOW! Congrats
IM GOING TO PEE ON MY SELF!!! FUCK YEA!!!
Go urinate on yourself. Whatever floats your boat.
lulz, good job!!