The oil price war threatens the U.S. shale industry … more big gains from our Dark Pool trader … and new companies from Neil George featuring heavy insider buying
The price war in the oil markets has claimed its first U.S. victim.
Yesterday, Whiting Petroleum, at one time the largest oil producer in North Dakota’s Bakken Shale, filed for bankruptcy.
Just last week, the shale producer drew $650M on its credit facility, noting it was for added operational liquidity, as well as to help service its upcoming debt obligations. However, yesterday, Whiting defaulted on its $262 million debt payment that was due.
***As we’ve been chronicling here in the Digest, the ongoing oil price war between the Russians and Saudis, combined with the cliff-edge drop in consumer demand for gasoline, has decimated oil prices
March witnessed the largest monthly drop in oil prices ever.
Below, you can see the destruction in the price of West Texas Intermediate (WTI) crude, which is the primary gauge of U.S. crude. WTI futures fell more than 66% in the first quarter — 53% of that coming in just the last month.
Source: Wall Street Journal
Most U.S. oil shale producers budget for oil between $55 and $65 a barrel. Yet, as I write, WTI futures are trading at $25.23. It’s simple math that many higher-cost producers can’t survive for long at these prices.
***But just this morning, news broke that President Trump says he has spoken to Russian President Vladmir Putin and the Crown Prince of Saudi Arabia, Mohammed Bin Salman
As I write mid-day, we’re learning that the Russians and Saudis will allegedly announce a production cut of 10 million barrels a day, although the cut could be as high as 15 million barrels.
From The Wall Street Journal:
Crude prices soared Thursday after President Trump said he expected Saudi Arabia and Russia would agree to new oil-production cuts …
Mr. Trump said Thursday he had spoken with Crown Prince Mohammed bin Salman of Saudi Arabia, who had communicated with Russia’s President Vladimir Putin. “I expect [and] hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more,” Mr. Trump said in a tweet.
This would bring critical relief to the U.S. energy sector.
Just three days ago, Saudi Arabia was following through on its pledge to ramp up oil exports in April. As of Tuesday, the first wave of crude was already on its way to Europe and the U.S.
The Saudis were targeting a new supply record of 12.3 million barrels a day in April, up from just 9.7 million barrels in February.
Meanwhile, it’s not clear when authorities will be able to contain COVID-19, therein ending the chokehold it has on U.S. consumer demand for oil.
It appeared that these supply/demand dynamics would result in $20 oil for the foreseeable future … which would have certainly led to more U.S. energy bankruptcies.
That makes this morning’s news a gamechanger if the Saudis and Russians do, in fact, cut production.
Oil is blazing higher in the wake of the news, up 24% as I write. We’ll continue to keep you up to speed as we learn more.
***As oil investors are welcoming this relief, a different type of market approach has is printing money — even during this historic market volatility
I’m talking about Dark Pool trading.
We first profiled the “Dark Pool” in our March 4th Digest. If you missed it and want to dig into all the details, click here to access that issue.
But as a brief synopsis, in short, Dark Pools are private stock exchanges where the “big boys” on Wall Street place their trades. These exchanges allow traders to buy and sell large blocks of shares without running the risk that other traders will see their hand.
The reality is that when an institutional investor makes a big move in a stock, it can easily push that stock’s price around by 5% – 10% in the span of a week. Now, imagine you could monitor the buying and selling activity of these giant institutions and anticipate what stocks and ETFs are poised to move that much.
It turns out you can — which is the foundation of Dark Pool trades.
So far, Dark Pool expert Stefanie Kammerman has closed three trades since we’ve begun profiling her strategy. The first was on oil service giant, Schlumberger. The total return was nearly 75% …in three days.
The second trade was on the SPDR Select Energy Fund, XLE. It was a winner, taking in more than 130% … in two trading days.
Finally, just last week, Stefanie closed her third trade, this one on the iShares MSCI Japan Index Fund EWJ.
Similar to Stefanie’s first two trades, she established both a bullish and bearish position in EWJ. That way, she was covered regardless of which direction the ETF moved.
She recommended the trade on 3/19. Just seven days later, she recommended closing the first half of the trade for a ROI of 131%.
Later that same day, she issued instructions to close out another quarter, this time for a ROI of 186%.
The final quarter came the following day, locking in a ROI of 286%.
In all, that’s a weighted-average return of 183.5% on the bullish side of her trade. Because the bearish side of the trade didn’t go anywhere, we then divide this return in half to reach the final, bottom-line return on the entire trade …
92% gains in just seven trading days … in the midst of one of the most chaotic markets in history.
That’s the power of Dark Pool trading.
We’ll continue to keep you updated on Stefanie’s trades, as well as when they might be available to you and me.
***Finally, let’s continue adding to Neil George’s list of stocks seeing heavy insider buying
While there’s no absolute best, “one size fits all” indicator for zeroing in on cheap, depressed stocks ready to soar in value, at the top of our list, you’ll find three words … “heavy insider buying.”
There are many reasons why corporate insiders sell company stock, but only one reason they buy them — they think the price is going up.
Corporate executives and directors have the best information on their companies’ prospects and financial conditions. Insiders typically see boom times and bust times way ahead of outsiders.
Fortunately, corporate insiders must report their buying and selling activity to the government. This allows outsiders to peak over their shoulders and get clues that an executive team believes a stock price increase is imminent.
So, the question is which stocks are seeing heavy insider buying today?
Over the past several days, Neil George, editor of Profitable Investing, has done the research for us. Neil has been diving into corporate filings, looking for notable cases of heavy insider buying. We published his first batch of results in Monday’s Digest.
Today, we’re going to add a few names to the list. So, at this point, I’m going to hand it over to Neil.
***Four new companies with heavy insider buying
Enterprise Product Partners (EPD) which is a long-standing pipeline company at the core of the US energy market has had 31 block buy transactions from management including the CEOs Randy Flower and Jim Teague as well as the board members amounting to 600 thousand shares.
Life Storage (LSI) is as its name implies owns and runs self-storage facilities around the nation. It has been rolling up local companies and is very digitally savvy for younger customers. The economic upheaval is a big boon for this company. It has reported 9 insiders buying shares in blocks amounting to 24 thousand shares.
Verizon (VZ) the major communications utility has reported 17 insider buys resulting in block buy trades amounting to 141 thousand shares.
Hannon Armstrong Sustainable Infrastructure Capital (HASI) provides financing to green and renewable energy projects in the US with government guarantees. It does so structured as a REIT which provides it with tax savings and investors with tax-advantaged dividends. It has reported 13 insider transactions amounting to block trades of 115 thousand shares. And the CEO and Chairman, Jeffrey Eckel has brought his personal stake in the company to 1,224,224 shares.
***Jeff here again …
As Neil noted on Monday, insider buys are no guarantee that a company’s profits and share price will immediately race higher. But in this time of market uncertainty, stock-purchases by top-level insiders (especially by the CEO, CFO, management and board members) are good indicators that those who know the company are confident enough to put their own money on the line.
We’ll continue to bring you the results of Neil’s research in the days to come.
Have a good evening,
Jeff Remsburg
