Last year when energy prices crashed due to the COVID-19 lockdowns I boldly stepped into the market and began buying beaten down energy stocks. Many of which were crown jewels that were selling at generational lows.
I wanted to review a couple names and update my thoughts.
I bought Antero Resources (AR) based on a misperception the market had to the company’s finances. This idea was highlighted on Twitter by a couple of guys I follow.
I sold it last week for a 333% gain. I still believe that the company has decent prospects going forward. However, the financials and hedging program are difficult for analysts and investors to understand so I believe it holds back the stock.
I still hold Schlumberger (SLB) which is the world’s largest oilfield service company. The company recently reported earnings and gave positive comments on the oilfield recovery. This position is up 47% over the last year.
I am also holding shares in the large oilsands producer Suncor (SU). This company has a fixed cost asset base and once the oil price exceeded that most of the excess cash goes to the balance sheet. The company has been buying back its shares (around 3% in the last year) and is moving forward with plans to buy another 3%. I am up 68% in this position.
Finally, a speculative name I put out was Athabasca Oil Sands (ATH). It is a smaller oil sands producer with relatively high fixed costs. When oil prices crashed this company was looking at serious issues with solvency and the share price crashed hard. With oil prices well above $70/bbl the situation has improved tremendously.
In the recent quarterly report, the company reported record earnings and cashflow. The stock is up 440%.
I do not throw these results out there to brag. It is a result of understanding what was happening and taking the bet that although the economic lockdowns caused oil demand and prices to drop, history indicated that they would eventually recover. That is contrarian thinking and that is what I try to do at Actionable Intelligence Alert Newsletter.