Sunday, March 6, 2011

The Crude Risk Premium (2)

Just to review - the current run up in the price of Crude is the risk premium the market tacks on due to the uncertain outlook for the larger crude producing Arab states. The “risk premium” beneficiaries would be the senior and junior crude produces and the oilfield service companies – names like Suncor Energy Inc, Canadian Natural Resources Limited, Cenovus Energy Inc, Precision Drilling Corporation and the BMO Junior Oil Index ETF (ZJO) Other beneficiaries in the consumer space, Dollarama Inc., Dorel Industries Inc and Tim Hortons Inc. In the US stocks like Altria, Disney, Yum Brands and Coca Cola are just beginning new intermediate cycle advances

The energy complex has been red-hot lately which is good if you’re on board, what to do if you have missed the big move? Do you hold your nose and buy now? Suggestion; the oilfield service companies will benefit even if crude stalls in here. Note the weekly chart of Precision, Savanna and Trinidad plotted with a 10 and 30 week MA - all just in the early stages of a run and posting new 52-week highs. New 52-wk highs are like new 52-wk lows – the first one is usually not the last one.

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