09/16/2005 12:00 am EST
Beth Gaston Moon, an analyst with Schaeffer's Investment Research, uses a proprietary rating system that ranks stocks from 1 to 10 based on various technical, fundamental, and sentiment indicators. In the wake of Katrina, one energy play scores a perfect 10.
"Denver-based independent oil-and-gas exploration and production company Delta Petroleum (DPTR NASDAQ) presumably takes its name from the Louisiana and South Texas delta region, in which the majority of its fortune resides. The firm has 167.7 billion cubic feet of proven natural-gas reserves, 56% of which is found in the aforementioned region. As this very region begins the slow process of digging out from Hurricane Katrina, analysts have noted that the company's focus and capital investment will shift from the Gulf states toward the Rocky-Mountain region.
"Like most of its peers in the oil patch, which have been impacted by speculative trading in the wake of Katrina's wrath, DPTR has been on a tear of late, rallying along its ten-week moving average for the past few months, and gaining 120% since late May. Recently, the stock pushed ahead of its March peak in the 17 region and pressed to a new all-time high.But a stock cannot live by technicals alone, and it is a bevy of sentiment indicators that earns DPTR its perfect Schaeffer's Equity Scorecard rating of 10.0. Helping contribute to this rarely seen score, in addition to promising price action, is a bearishly slanted SOIR and positive insider transactions.
"Also encouraging for DPTR is its short-interest picture. A 5.5% increase in DPTR shorts brought total short interest to about five million, or 21% of the equity's float. Short interest has been on the rise for this stock since March 2004, increasing nine-fold during the past 17 months. At the equity's average daily volume, it would take these short sellers more than 11 trading days to eradicate all of their bearish bets. And with DPTR continuing to mosey higher, the chances of a short squeeze grow greater each day.