GE and The Current Price of Oil

GE announces Q4 results tomorrow morning…and I’m a little worried.

The company has been transitioning from a focus on Finance (think: GE Capital) to Infrastructure; which includes GE Oil & Gas. With the market’s recent focus on oil prices, I believe the Oil & Gas platform will be a main focus for investors tomorrow. Even if they haven’t been directly affected by falling oil prices yet, contract backlog is sure to be lower than it was last quarter and future outlook for Oil & Gas will be grim.

GE

Just a few months ago many people thought we hit bottom at $80/barrel; now we’re close to $45/barrel. How much lower will we go? Rig counts are down and low gas prices can already be seen at the pump. With gas prices this low, finding a cheap plane ticket and taking a nice vacation sounds like a great plan right now. Filling up my tank and going on a long road trip would also be a brilliant idea. More consumers will be jumping on the “gas is cheap, why not” mentality. I don’t think we’ve hit the bottom yet, but we’re getting close. A significant shift in supply & demand is nearing as the U.S. produces less oil and consumers use more gas (70% of oil is used for transportation). The U.S. doubling production since 2012 and increasing the world oil supply is the only reason oil prices are low today.

US_oil_productionYou can play with the government oil charts here.

OPEC has assured us they won’t cut production; forcing the U.S. to abandon its precious domestic shale plays. This display of power from foreign countries is only made possible by the easy access to oil under their soil. It costs much more to frack oil out of American shale than to drill for it in the Middle East.
Let’s take a look at some average breakeven costs:

Saudi Arabia: $5 to $10 per barrel

Utica Shale (West Virginia, Ohio, Pennsylvania, New York): 
$75 per barrel
Tuscaloosa Marine Shale (Louisiana & Mississippi):
$70 to $90 per barrel
Niobrara Chalk (Colorado , Kansas, Wyoming): $60 to $70 per barrel
Bakken Shale (North Dakota, Montana, Canada): $70 per barrel
Mississippian Lime (Oklahoma & Kansas): $75 per barrel
Anadarko Basin (Texas to Kansas): $60 to $80 per barrel
Eagle Ford Shale (Texas): $50 to $60 per barrel

The oil shale economics clearly doesn’t work with prices at $45/barrel, hence the swift drop in Baker Hughes’ rig count:
Baker Hughes Rig CountI’ve been considering dollar-cost averaging into royalty trusts as oil moves lower.
My guess for the bottom: $35 to $45 per barrel.
If oil stays steadily below $45, I’m buying in.

Sell: S at $4.20

Loss: $134.84   2.7% loss    Sold 1162 shares of Sprint (S) at $4.20/share.

I decided to pull money out of Sprint (its made me nervous since the day I bought it) and focus on moving in to royalty trusts. The Secretary General of OPEC has the energy markets climbing today after suggesting oil prices will remain low for 1 more month before rebounding. I was planning on buying in to energy in a month, so he might be on to something.

The last few seconds of the interview are the most important…

Buy: S at $4.30

sprint-logo

Purchased 1162 shares of Sprint Corp. (S) at $4.30/share. Total cost: $5,011.27.

I’ve been watching Sprint for a while now. They recently reported adding a significant number of new customers through their “cut-your-bill-in-half” promotion. I haven’t done much research on Sprint, so I’m somewhat regretting the quick buy-in. If Sprint moves lower, I’m getting out and moving the money into BAC or GE.

ScottStocks 2014 Second Year Review

ScottStocks’ 2nd year results are in and they look good!

With an average of $11,100 invested throughout the year, the portfolio made…

2014 Return

…with 70% of the profit attributed to RAD trading.

This realized return was hurt by holding onto MDR(as of today, it’s at a $1,100 loss) and GE(held for dividends). Buying RAD a few weeks ago makes up for the MDR loss I’ve accumulated over the past couple years. In 2 weeks, RAD has brought in over $1,000 in unrealized gains. I can see it gaining $1,500 more in the beginning of this year.

The ScottStocks portfolio was just ahead of the S&P 500 return of 11.74% for the year.

S&P_2014

This S&P 500 chart makes me question why I have any money in the market right now. I thought 2014 would be a bad year and nearly missed the bull market.

Will 2015 be just as good?

RAD to the Rescue

This year has been slow for the ScottStocks portfolio; with Rite Aid being the star performer the first half of the year.
RADyear2013-2014

I had bought in as RAD peaked in June and have been losing money…until now. When news of an improved 2015 forecast was announced, the fundamentals changed and RAD was put back on the map for exceptional growth going into 2015. Today’s RAD rally brought in $400 for the ScottStocks portfolio and I can see it bringing in more within the next few months.
RAD_12.22.2014

RAD Earnings 12/18/2014

We’re about to see some heavy upward movement on RAD today that will continue into the new year.

Quarterly earnings are in…and they look beautiful! My last post on RAD suggested the execs have always downplayed how well their company is turning around. Today reaffirms that thinking. They’ve hit the sweet spot for new sales and with the additional support from Obamacare customers, RiteAid is quickly turning around.  I’m planning on buying a significant number of shares this morning as soon as the market opens.

12.18.14

GE and BAC are both up in pre-trading today. Looks like it’s going to be a very good morning.