Anadarko Petroleum Corporation (NYSE:APC) — This large, independent exploration and production company has been on my buy list for months. Apparently Standard & Poor’s is still positive over its future as well, since it has awarded it the highest of its ratings — a five-star strong buy.
S&P has examined its capital spending plan and concluded that it will cut spending plans 50% in 2016 which comes about after a 37% cut in 2015. Earnings are estimated at -$2.74 in 2016, up from a loss of $13.18 in 2015.
APC has agreed to buy the deepwater assets of Freeport-McMoRan Inc (NYSE:FCX) for $2 billion and quotes management as saying that the purchase should bring in $3 billion of incremental free cash flow over the next five years, an amount that S&P deems significant.
And the acquisition of Lucius deepwater is expected to reduce the risks for APC. Their target price of $65 per share is based upon an 8.3X to projected 2017 operating cash flow, with solid earnings to follow.
After falling from almost $100 per share in late 2014, APC reversed from a closing low of about $30 in January 2016. That low developed into a bull channel that was supported by its 50-day moving average until late in July.
But the break lower was supported at the 200-day moving average and was followed by two of my CBR Buy signals and a selling climax in September.
In the past three sessions, the stock regained its bullish support line and the bull channel. Since the September selling climax, accumulation has been above-average, supporting a move back into the channel. But APC could pull back to $60 and find support at its 20-day moving average at $59. Thus try to buy APS at $60 for a trade to $70 for a gain of 16%. A stop-loss order should be entered at $55.
