We all know that the market is inefficient. At any moment in time we can find specific stock stories that can be exploited for short-term profits. That’s the theory behind Jon Markman’s StrataGem portfolio offered in his top-performing Strategic Advantage newsletter service.
Each month Jon puts 6,000 stocks through a rigorous selection process that results in a selection of 7 stocks that can be expected to be top performers over a six month period.
In March, his selection of Anadarko Petroleum (APC) caught my eye. With the summer driving season on the way and continued record-high oil prices, APC is poised to rally in the short term.
I definitely think Jon is onto something here.
Why in the world do oil stocks trade for such low valuations? Apparently investors believe that $20 oil will be returning soon. Think again.
Profit From Down and Dirty Drilling
Now solidly above $100 per barrel, the stampede higher does not appear to be abating anytime soon. Global instability, speculation and record demand are conspiring together in a perfect storm for oil prices. The beneficiaries of these circumstances will be the oil companies. That is until the Democrats take over and tax the heck out of them. Investors need to act soon before this gravy train ends.
So why buy Anadarko?
Jon Markman’s recommendation is one good reason, but there are several others.
The biggest reason is valuation. The market is clearly betting that oil prices will be dropping soon. How else do you explain the fact that APC trades for just 8 times trailing earnings but 17 times forward earnings? Obviously analyst estimates are dropping as a result of an expected slowdown in the world economy.
Well that may be true, but in the short term, there is no sign of impending world recession. Yes, the United States is in the process of receding, but all systems are still a go around the rest of the world.
Take a look at results for APC over the last 4 quarters. In each case, the company blew by estimates by a wide margin. I think it is safe to say that the same will happen for the next two or three quarters. That means there should be some serious upside to APC over the next six months as that earnings beat mode continues.
The summer driving season is nearly upon us, and though U.S. demand is slowing, global demand is increasing. It is clearly still not too late to take advantage of high oil prices in the near term. The market is merely guessing that the trend will end soon. That is your opportunity to take advantage of inefficient pricing. I expect APC to be Jon Markman’s next big StrataGem winner.
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