The need for oil drilling services will continue even if the price of oil declines, according to Richard Lehmann. Here, in his The ETF Investor, he looks at a favorite way for investors to play this trend.
"Oil prices have a triple or quadruple price boost associated with them. The first is supply/demand dynamics, the second is the weak dollar, the third is speculative fervor and the fourth inflation fears.
"A pundit said that last year it took 65 Euros to buy a barrel of oil and today it still takes 65 Euros to buy a barrel of oil. This illustrates the effect the weak dollar is having on U.S. prices and the international price of oil.
"Inflation protection used to be the province of gold, but now it seems oil is serving a similar function. We think the current oil bubble has not run its course.
"One of our past recommendations, the Oil Service Holders Trust (NYSE: OIH), was first suggested in February 2006 at a price of $101.50. We recommended it again in December 2007 at a price of $179.83.
BCE Inc. (NYSE: BCE) shares are jumping over 10% in premarket trading after Canada's Supreme Court overturned a Quebec Court decision, clearing the way for the $52 billion leveraged buyout by Ontario Teachers' Pension Plan and U.S. private equity firms. The buyers might still negotiate the price down though.
Halliburton (NYSE: HAL) withdrew a $3.6 billion offer for Britain's Expro International after the U.K. oil services firm stuck by a smaller bid from a private-equity consortium.
Some analyst calls this morning:
J.C. Penney Co. (NYSE: JCP) was upgraded by Deutsche Bank to Buy from Hold and the price target upped to $46 from $45.
Motorola Inc. (NYSE: MOT) was downgraded by Piper Jaffray to Sell from Neutral on continued weakness in North American market. The target price was cut to $7 from $9.75. Shares are down over 2% in premarket trading.
First Solar (NYSE: FSLR) price target was upped at Lehman Brothers from $280 to $335. Shares are up over 2.5% in premarket trading.
After hitting a one-year low of $30.00 in January, the stock has hit a new one-year high today. HAL opened this morning at $49.74. So far today the stock has hit a low of $49.61 and a high of $51.12. As of 12:40, HAL is trading at $50.01, up 71 cents (1.4%). The chart for HAL looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just six weeks as long as HAL is above $45 at July expiration. HAL would have to fall by more than 9% before we would start to lose money. Learn more about this type of trade here.
HAL hasn't been below $45 by more than a few cents since early April and has shown support around $48 recently. This trade could be risky if the price of oil heads lower, but even if that happens, this position could be protected by the support the stock might find around $45 where it formed a bottom over the past two months.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in HAL.
The Wall Street Journal also reported that the oil industry and some U.S. lawmakers are looking to end long-standing bans on domestic drilling put in place to protect areas that are environmentally-sensitive, fueled by concerns about global energy.
In an interview with the Financial Times, Citigroup Incorporated's (NYSE: C) former chairman and CEO Sandy Weill acknowledged that choosing Chuck Prince as his successor in 2003 turned out not to be the "right thing" for the company and was flawed. Instead of handing the job to Prince, Weill said the board should have fostered competition among the bank's top managers for the job.
OTHER PAPERS:
According to the Washington Post, MedImmune, a unit of drug giant AstraZeneca Plc (NYSE: AZN),settled with Genentech Inc (NYSE: DNA) a lawsuit over a patented component of its best-selling drug Synagis, which is aimed at preventing respiratory infections in infants. No details of the settlement were provided.
Stock futures were lower Friday morning as one again crude prices resumed their seemingly endless move upward. The market may also be agitated about further data upcoming about the housing market.
On Thursday, U.S. stocks ended higher two days of heavy losses as finally crude-oil futures retreated, giving some relief to the markets. The Dow industrials finished 24 points higher, or 0.19%, the Nasdaq Composite rose 16 points, or 0.67%, and the S&P 500 added 3 points, or 0.26%.
Only one economic report is due out today. April existing-home sales will be released at 10 a.m. EDT, and economists expect it to decline yet again.
Oil prices rose Friday, as supply concerns once again took center stage especially with growing global demand. After tumbling around $4 overnight from a record above $135 a barrel, light, sweet crude for June delivery was up $1.29 to $132.10 a barrel.
With the long weekend just around the corner, trading might be lighter than usual today. U.S. markets will be closed Monday for Memorial Day.
Today was a very gloomy day in the stock market with Oil reaching new highs and everything else losing -- almost. Among the few winners, and I mean very few, Apple Inc. (NASDAQ: AAPL), oil, and specialty steel were up. I went through my watch list and found this very short list of winners:
TheStreet.com's Jim Cramer says lots of companies now thrive with crude up here.
Oil's not a tax on everything -- it's a tax on the consumer. That's what I come down to when I see the charts this weekend and ponder what's happening in so much of industrial America.
Company after company that I examine -- the new techs, as I call them -- actually benefit from higher oil prices. Or they can pass them on with ease, because of the worldwide demand being so strong.
Take all of the companies involved with making a Boeing (NYSE: BA) (Cramer's Take): Boeing itself, Alcoa (NYSE: AA) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take) and Precision Castparts (NYSE: PCP) (Cramer's Take) being good examples. Each of these is necessary because the new Dreamliner burns lots less fuel, and with fuel the biggest airline cost, it stands to reason that higher energy prices make the plane more desirable even at a higher price point.
The Telegraph also reported that U.K.-based Imperial Tobacco Group Plc (NYSE: ITY) could conduct a GBP5B rights issue this week. The company has suggested that it needs the funds in order to retain its investment-grade credit rating following its acquisition of Altadis.
WEB SITES:
According toBloomberg, regulatory filings show that banks such as Citigroup Incorporated (NYSE: C) are failing to acknowledge at $35B of additional writedowns in their income statements.
The drug maker posted net income of $3.3 billion, or $1.52 per share, for the January-March period, up from $1.7 billion, or 78 cents a share, a year ago. Excluding one-time items, Merck earned 89 cents per share, beating by three cents the forecast of analysts surveyed by Thomson Financial.
Revenues totaled $5.82 billion, up 1% from $5.77 billion in the first three months of 2007, but below analysts' expectations of $6.11 billion. The company attributed the slow sales growth to the weak U.S. dollar.
Merck shares fell Monday 13 cents, to close at $39.63. Shares are down 23% in the past year.
U.S. futures are down this morning after Bank of America (NYSE: BAC) released disappointing figures for the quarter. The country's second-largest bank said net income plunged to $1.21 billion, or 23 cents a share, from $5.26 billion, or $1.16 a share, a year ago. Analysts had been expecting earnings of 41 cents a share.
Meanwhile, Merck (NYS: MRK) said first-quarter income jumped 94% to $3.3 million, or $1.52 a share, from $1.7 million, or 78 cents a share, a year earlier. Excluding a $1.4 billion gain from the AstraZeneca partnership and restructuring charges, Merck posted income of 89 cents a share. Worldwide sales climbed 1% to $5.8 billion, aided by the weak U.S. dollar.
Halliburton (NYSE: HAL) said Q1 earnings rose to $584 million from $552 million, while revenue increased to $4.03 billion from $3.42 billion, a year earlier. Elli Lilly reported earnings of $1.06 billion, or 97 cents a share, up from $508.7 million, or 47 cents. Analysts had expected somewhat better numbers from Lilly.
Despite a week of mixed earnings reports, the Dow, Nasdaq, and S&P 500 surged Friday, each ending the week up more than 4%. This is another big week of earnings reports, with Texas Instruments reporting today after the bell.
MOST NOTEWORTHY: Semiconductors, ADC Telecomm and Nationwide Financial were today's noteworthy upgrades:
Banc of America upgraded the Semiconductor Sector to Overweight from Market Weight citing indications of a bottom given earnings estimate revision momentum and supply chain inventory levels. The firm upgraded Intel (NASDAQ:INTC), Power Integrations (NASDAQ:POWI) and Semtech (NASDAQ:SMTC) to Buy from Neutral and PMC Sierra (NASDAQ:PMCS) and LSI Corp (NYSE:LSI) to Neutral from Sell.
Deutsche Bank upgraded shares of ADC Telecomm (NASDAQ:ADCT) to Buy from Hold as they believe April consensus estimates could prove conservative.
UBS raised Nationwide Financial (NYSE::NFS) to Buy from Neutral and believes a higher offer by Nationwide Mutual is likely.
OTHER UPGRADES:
Halliburton (NYSE:HAL) was upgraded to Buy from Neutral at Goldman.
Westlate Chemical (NYSE:WLK) was raised to Overweight from Equal Weight at Morgan Stanley.
MOST NOTEWORTHY: Cott Corp, Hartford Financial, Allstate and Valero Energy were today's noteworthy upgrades:
Lehman upgraded Cott Corp (NYSE: COT) to Equal Weight from Underweight citing recent management changes, a focus on CSD business, and new product discipline.
Bernstein believes the entire non-life insurance group is oversold and that it is time to buy; the firm upgraded Hartford Financial (NYSE: HIG) and Allstate (NYSE: ALL) to Outperform from Market Perform.
Valero Energy (NYSE: VLO) was raised to Buy from Hold at Deutsche Bank on valuation with the stock trading at a -30% discount to NAV while the asset market for U.S. refineries is strong.
OTHER UPGRADES:
Goldman added Cisco (NASDAQ: CSCO) to its Conviction Buy List.
TheStreet.com's Jim Cramer says three widely held beliefs are just too bullish to be true.
Sometimes it just hits you. You will be reading an article about some fund manager somewhere who sounds perfectly intelligent and you will spot it, the holy grail of the moment -- THE CONSENSUS. I won't mention the fellow's name -- it is unimportant -- because he's good at his job, but the thoughts he is currently expounding sound like many others I hear, to wit:
1. Oil prices will fall to $80 a barrel.
2. The dollar will rise when the Fed stops cutting rates.
3. GDP growth in China will slow.
First, let me just say that those events would be bullish for every domestic company in our universe, including the financials, and we would have a miracle bull market where less than 20% of the market -- ag/mineral/oil and gas/infra --collapses and fully 80% of the market can rally (I am including the health care stocks because, somehow, they have been seen to become hostage to the weak federal government, and in this scenario I don't see the federal government as worried about cutting back spending).
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Stock futures were lower Friday morning as one again crude prices resumed their seemingly endless move upward. The market may also be agitated about further data upcoming about the housing market.
Today was a very gloomy day in the stock market with Oil reaching new highs and everything else losing -- almost. Among the few winners, and I mean very few,
Here are some highlights from this past week's 
Some good news: .gif){kind=logo}
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The week in preview: New quarter earnings kick-off
Comfort Zone Investing: Keep your recovery expectations real
Will Americans have to slim down to fit into their cars?
