As a hedge, I have also started to short the shares of two North Dakota based companies which I feel will be greatly impacted by low oil prices (permits and new drilling activity will soon cease and layoffs should mount in the state). The two stocks are BNCC - a bank with 67% of their loan portfolio with North Dakota exposure, and IRET - a Real Estate Investment Trust also with heavy concentration in areas of the oil patch (they own both residential apartments and commercial buildings).
I have been very tempted to start building positions in some micro-cap oils that have been knocked down, but I fear it is a little too soon, as the oil plunge may last for an extended period. However I have started to look again at my old favorite ESTE, as after the merger with Oak Valley, the combined company will have no debt and $7.00 to $8.00 in cash per share, if the numbers presented are accurate (and Earthstone's small debt - about $7MM - will be paid off). So I have bought a few shares as the stock price has tanked to the $15 area.
As a hedge, I have also started to short the shares of two North Dakota based companies which I feel will be greatly impacted by low oil prices (permits and new drilling activity will soon cease and layoffs should mount in the state). The two stocks are BNCC - a bank with 67% of their loan portfolio with North Dakota exposure, and IRET - a Real Estate Investment Trust also with heavy concentration in areas of the oil patch (they own both residential apartments and commercial buildings). I am just starting my annual portfolio of about 5 or 6 stocks that have been knocked down during the course of the year, with tax selling adding pressure. The theory is that small cap stocks that performed poorly through tax loss season will rebound in the first couple of weeks in January - hence the "January Effect". This has been a very profitable trade in most years. So far I have only actually confirmed one stock to purchase - RFIL. I basically look for value type stocks that have been beat down (only micro-caps). Since this is only a two or three week trade (not an investment) I do limited research. I will be posting the other stocks here soon.
***Edit on December 11: I am adding these stocks to the January Effect Portfolio... JVA - LUNA - RFIL - INBK - OBCI INBK - First Internet Bank is also a long term hold for us. This is my replacement for BOFI as it is much cheaper from the value side. |
Paul SaadSenior Manager, Paul Saad and Associates, LLC Archives
May 2020
Categories |