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Oil explorer stocks have done what at least one savvy money manager expected this year. Back in January, Fidelity Investments energy portfolio manager John Dowd weighed in with commentary that rejected the gloom and doom crowd. Dowd took more of a gloom and room to run position. Valuations had fallen to levels where oil stocks historically had “rebounded and delivered positive performance,” he noted. “All of the gloom is generally reflected in the historically low valuations for energy stocks as if this environment is permanent, but I don’t believe it is,” Dowd wrote. Fidelity published his comments Jan. 20, which happened to be the same day that IBD’s industry group Oil & Gas-U.S. Exploration & Production notched a low. How low was it? The market hadn’t seen a lower level since early 2009. Stock moves based on valuations aren’t IBD’s forte. IBD’s method involves buying the best stocks in the best markets. Oil explorers aren’t the best stocks in fundamentals, and this market certainly isn’t the best. One choice available to the individual investor is the swing trade. These sometimes involve stocks that are more of a relative strength story than a great fundamentals story. In swing trades, the investor is not looking for what could become another of history’s greatest stocks. The swing trader is looking for favorable conditions for a smaller profit over a shorter period of time. The oil explorer group was No. 27 Thursday, up from No. 174 at the end of 2015. Within the oil explorer group, three stocks have done especially well this year. Range Resources ( RRC ) is up 72% year to date. The company focuses on unconventional plays, such as shale, coal bed methane and tight gas sand reservoirs. The stock’s three-month Relative Price Strength Rating is 97, putting it in the top three percentile. Continental Resources ( CLR ) is up 71% this year. The company is a major producer in the Bakken of North Dakota and Montana. The big cap also has positions in Oklahoma. The three-month RS rating is 98. Rice Energy ( RICE ) is up 69% this year. The small cap company is a natural gas and oil player in the Appalachian Basin. The three-month RS rating is 98. Apart from the bounce off valuations, a wildfire in Alberta is destroying supply and thereby boosting oil prices and oil stocks. Canada is a big player in the oil patch, sending about 100 million barrels of crude oil monthly to the U.S. and 240 billion cubic feet of natural gas monthly. Oil markets have generally had a modulated reaction, probably because U.S. inventories are high. More than 80,000 people have fled Fort McMurray, Alberta, including oil workers. The impact on prices hinges on whether or not oil facilities are damaged. Scalper1 News
Scalper1 News