Great Trades

Great stock trades based on fundamentals and technical analysis.

Thursday, January 26, 2006


Amerada Hess (AHC) Buy Opportunity

Amerada Hess (AHC), a leading oil producer, absolutely demolished analyst estimates by reporting $4.31 EPS yesterday vs. analyst estimates of $3.26 EPS. It's not often you see a companyblow out earnings by over a dollar. It was bid up over $10 in premarket yesterday, as the fundamental picture looked phenomenal with near 100% earnings growth at a forward PE of 8. However, oil futures took a hit during the day when an oil inventories report showed higher levels of inventory than expected. Oil stocks sold off hard on the news, and AHC closed up less than $2.

Today, the oil stock selloff is continuing, with early oil futures weakness. AHC traded down to the 143's, about $3 below where it was before the blowout earnings.

Given the incredible fundamentals after the earnings blowout, we feel that AHC is a good buy on this oil stock selloff for at least a quick trade. However, a close stop should be used in case oil and oil stocks sell off hard again. Given the discount from the pre-earnings price and the amazing earnings of AHC, we think AHC will move higher as long as the oil sector as a whole stays strong. With oil prices where they are, AHC and other oil producers have been rolling in profits. Longer term, we believe they'll continue to do very well as the demand from countries like China and India increases the global energy needs significantly.

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