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The MV Wish List: Energy, Gas and Metals


Do you know what you want?


Where do you want to be in the energy, gas, and metals sectors? Don't know? Our professors have some ideas. Behold, the Minyanville Wish List:

Prof. Ryan Krueger
Sector: Energy

  • Washington Group (WNG) – The company has exposure to power generation including nuclear, environmental remediation, and mining industries. It's the smallest of the group at $2 billion in market cap. It has the lowest average top-line growth over the past three years at 11%/yr and the fewest number of analysts follow the stock, only four.
  • Fluor (FLR) – FLR has exposure to oil and gas projects, the chemical industry, and power generation including coal industries. It's the largest of the group at $8 billion in market cap, and the most richly valued on earnings at 34 times the last four quarters. It has the lowest EBIDTA margins at 3.5%. The most analysts follow the stock, at 15. Insider selling over buying at the highest ratio.
  • Jacobs (JEC) – The company has exposure to oil and gas exploration and refining, biotechnology, and paper industries. It has the highest top-line average revenue growth over the past three years at 23%/yr.
  • Chicago Bridge & Iron (CBI) – CBI has exposure to oil and gas, chemical, power, water, and mining industries. It's the biggest winner year-to-date at up 20% and over the last 12 months, up 35% (after struggling with accounting issues). It has the cheapest valuation of 17 times the last four quarters' earnings.
  • Foster Wheeler (FWLT) – This company has exposure to oil and gas, power, chemicals and alternative fuel including liquefied natural gas industries. It has the highest EBIDTA margins at 8.8% and the most debt at 74% of market cap. Insider buying over selling at the highest ratio.
  • Shaw Group (SGR) SGR has exposure to power, piping, and environmental industries. It has the highest average earnings growth rate of the past three years at +40%/yr. It is the worst performer over the past 12 months, down 9%.
  • KBR (KBR) – KBR is a spin-off from Halliburton (HAL) in 2006. It's the biggest loser for the year, down 21%, yet most recently reported one of the two largest upside earnings surprises (55% higher than expected) in the group. The company sports 0% long-term debt on its balance sheet

Prof. Adam Michael
Sector: Energy

  • BPZ Energy (BZP) – This is a Peruvian oil play that also has significant natural gas reserve potential. I expect several catalysts in next two-three months regarding a couple more wells it is working on in its Corvina field.
  • The Exploration Company (TXCO) – This is a Texas Oil Sands play that if it works is worth several multiples of the company's market cap. It also has significant natural gas potential in the Pearsall Shale (Where Anadarko (APC) and a private company financed by Jerry Jones, the owner of the Dallas Cowboys, are currently drilling).
  • Houston American Energy (HGO) – This company has several working interests in Colombia based on indirect ownership in Hupecol. This is the most speculative name listed here so expect lots of volatility with this one.

Prof. Adam Michael
Sector: Gas

  • Southwestern Energy (SWN) – This is an unconventional natural gas play in the Fayetteville Shale.
  • Ultra Petroleum (UPL) – Another unconventional natural gas play in the Pinedale Anticline.
  • Carrizo (CRZO) – This is a more speculative play on the Barnett with possible huge upside catalyst in its MegaMata prospect (Gulf Coast).
  • Teton (TEC) – TEC is a small cap value play with Piceance basin assets worth more than current market cap according my model.
  • American Oil & Gas (AEZ) – This is the most speculative of the stocks I have listed. It has huge potential in its Fetter Gas Project, but also has potential oil exposure in Kreji play.

Prof. Lance Lewis
Sector: Metals

  • Gold Fields (GFI), Harmony Gold (HMY), ASA (ASA) – The South African rand is an even bigger piece of confetti than the dollar and it should continue to weaken against the dollar going forward providing South African producers HMY and GFI (whose costs are obviously in rand, as opposed to their revenues, which are in dollars) with greater leverage to gold than their non-South African counterparts. ASA is a closed end fund of mostly gold shares (40% or so is AngloGold Ashanti (AU), GFI and HMY) that is trading at a large discount to NAV, which makes it even more attractive
  • Kinross Gold (KGC) – Undervalued on an NAV basis.
  • Golden Star (GSS), Metallica Resources (MRB), Nevsun Resources (NSU, Minefielders (MFN) – All four of these junior names are takeover bait and trading well below their NAVs based on $700 gold.
  • Pan American Silver (PAAS) – Best silver producer on the board as far as quality of assets is concerned; undervalued on an NAV basis given current silver prices.
  • Newmont Mining (NEM) – It's dirt cheap (nearly 40% below NAV based on $700 gold) and universally hated for no good reason. It's a value play at this point, not to mention its enormous land package which could yield exploration success at any time.
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No positions in stocks mentioned.

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