Avoid These ‘Shale Legends’ For Now

The Fed continues to dominate the markets and our trading in oil and oil stocks.

God knows there are hundreds of writers out there with opinions on the next move for rates, so mine would only be so much more noise. Instead, let’s just acknowledge that the market is more likely than not to drag for the next several weeks, and thank our recent discipline in keeping our portfolios safe.

Let’s also notice some recent news that convinces me that our investment discipline will be well served for a long time to come. Oil stocks have in many cases, run ahead of Oil, the commodity – as these examples will show:

First up, the EOG Resources (EOG) purchase of Yates Petroleum for $2.5b in mostly stock. This strikes me as a prime example where the current disconnect in oil prices compared to shale oil stocks has made me wary of increasing positions, even selling majority percentages of long-term positions in many of my most favored E+P’s, including EOG. Add to this the even more exuberant froth that is persistently seen in those E+P’s who have a majority interest in the Permian formation, and even more specifically in the most Western Delaware basin. We have benefited from this ourselves, as our holdings in Silver Run Acquisitions, now acquiring its interest in Permian player Centennial, has rocketed (prematurely) above $16 a share, although is tempering itself.

Don’t call me bearish on oil, or bearish on the Permian – I…