Stocks and markets

LEH : Lehman Brothers talks to raise capital

2008-09-01T02:12:00.005-04:00

Lehman Brothers, a big broker with big trouble. Everybody know Lehman's value shrunk considerably in the last year. Like most big financials Lehman lost some big value with the sub prime mess and other credit related structured products. They have used leverage and they are just understanding it. For Lehman Brothers the institution, this possible stock issue is good for the reason that it will increase Lehman's chances to go throughout the credit crisis and the economic slowdown. From the shareholder point of view, the new capital will enable the management to decrease leverage and invest in non-correlated assets. However, the last time Lehman Brothers was featured in a Reuters article with talks about a 6bln equity deal, the stock lost 13.64% in the following day(06/11/08). "The sheer size of such a dilutive capital raise will put serious pressure on the bank's ability to deliver on meaningful earnings-per-share growth over the near to medium term," is what Oppenheimer & Co analyst Meredith Whitney said in a research note, just after the June talks of capital raise. I expect the stock to go lower for the simple reason that a bank that raises equity is most of the time, weak. I would not be long Lehman.

OGE : OGE Energy low volatility play

2008-08-31T20:02:00.002-04:00

OGE Energy is a low volatility stock and, this help you to have a good risk-adjusted return. This utility company operates mainly in Oklahoma and Arkansas. OGE operates more than 7500 miles of natural gas pipelines and two nat gas storage facilities that can store up to 23 billion cubic feet. They sell electricity to more than 750,000 retail customers and to many institutional customers. OGE Energy also offer their clients to receive green energy, if the client pay a premium on each 100kWh their electricity will be produced by wind power. OGE's wind power program is one of the largest in the US with 170 megawatts of power, enough electricity to power about 51,000 homes. The Oklahoma-based company also generates electricity from low-sulfur Wyoming coal for a total output of 6,200 megawatts. OGE utilizes natural gas as a boiler fuel to run certain gas fired generating plants to make electricity for its customers. The electric transmission and distribution systems span 30,000 square miles. The stock had a correlation between 0.16 and 0.38 with the USO ETF since the year started. The OGE/USO correlation is actually at 0.16, which is very non-correlated. However, OGE has a 0.54 correlation with the S&P500. The decision to have this company featured was based on technical analysis. The stock is higher than 20, 50 and 200 DMAs and the two shorter-term DMAs are looking up. There is possible resistance around 35.50. Be aware that 2007 was the only year since 2002 that the stock had a negative yearly return. The stock is down 5.5% year to date.

OIS : Oil States outlook

2008-08-31T19:07:00.002-04:00

This Houston-based provides a very large array of products and services to companies in the drilling business. One subsidiary specialize in sub sea pipelines, rigs and other deep sea drilling products. Oil States designs, manufactures and repairs it. They also rent completion-related tools and offer testing and flowback services. The second subsidiary is specialized in oil country tubular goods(rig tubes) which includes the casing and production tubing that is used to prevent the well bore from collapsing during drilling. Oil States is part of the largest distributors of tubular goods and logistics services in the world and offer a full range of OCTG sizes and grades. The third and last subsidiary is providing well site services such as on-site housing. As of May 2008, OIS was renting more than 4000 rooms to workers in Canadian oil sands regions. It also provide a wide array of accommodation for workers and rent equipment and offer drilling services. The stock of Oil States is correlated with USO even if this company could do very well with the oil barrel lower than 100. If the crude gets higher, this stock will too. If the crude just stay still, I expect Oil States Intl to outperform. On Wednesday 27th, the price has closed over the 50dma and refused to closed under it the next two days. The price went under it intraday both days but, the buyers were at the 50dma to buy. With this one, you know that if the price closes a day under the 50dma, it would be reasonable to sell and wait for the stock to get back over it. If you've looked at a short-term chart, you saw the price just over the 50dma. This average is not going up yet and the price will need to stay at the actual level or higher for the moving average to gain momentum.

HNZ : HJ Heinz strategic trademarks

2008-08-31T13:59:00.003-04:00

There is not a single house in North America that doesn't have a Heinz product in it. I actually have to buy their brand when buying these categories of products, that is because their recipe is way better. This kind of trademark force is what pushed Coke for so long. In this times of economic uncertainty, I feel confident that Heinz will retain most of their retail and institutional clients. For the retail clients, it's clearly the taste of the product that makes it. For the institutional clients, that is the prestige that Heinz's logos bring to another product or service. The real reason why I have a buy rating on this company is that the stock is just setting new 5-year highs and the stock is currently pulling back to create a buy opportunity. I believe the stock will ultimately go higher, if you look at monthly and weekly charts, the futures looks great. On the weekly time frame, the stock might need to go lower but as on the daily, the pullback is happening.
The best place to buy the stock would be when the price is at the 50dma or around and there is a up day with volume very high compared to average volume. This type of pull back on HJ Heinz occurred twice already this year(05/27/08 and 07/07/08)
but may not occur again. However, I think the 50dma is a support that the price tried to break several times since the price went from below to over the 50dma in early March. The chances that HNZ would drop drastically are thin compared to a lot of stocks not as well positioned in this time of economic uncertainty.

First post EVER

2008-08-31T12:20:00.000-04:00

Hello,

I'll just write a quick description of myself to start with. I'm 21 years old and I live in Montréal. I work in a bank and I love everything related to stock market, economies and derivatives. I like value investing and I'd love to do activist work but, my main tools to predict market are technical analysis, sector strength and economic indicators. I assume that nobody will read that since I've just started that blog, so I will not be writing a thousand word. In this blog, I will try to do quick analysis of many stocks and ETF and possibly some option plays. Most of the time, the analysis will be short and strait to the point. I want readers to be able to get my ideas quickly and then have time to do some research to corroborate my outlook. I will always be glad to answer questions and to write my opinion on a stock if you request it. Thank you for your time and enjoy.

Mathieu Godbout Paquet