Coolcat: Energy and Momentum
09/09/2014 7:00 am EST
Kevin Kennedy uses a momentum-based strategy that focuses on finding stocks that have broken out to new highs, followed by a pullback and consolidation. In his The Coolcat Report, he highlights three energy-related issues.
Lightbridge (LTBR) is a developer of nuclear fuel designs and provides nuclear energy consulting services.
The stock has doubled this year and trading volume has picked up as development of the company's metallic nuclear fuel technology progresses and it lines up more consulting work with nations developing nuclear power projects.
Future demand for nuclear power also appears to be gaining momentum worldwide, with a 60% increase in nuclear capacity projected by 2035.
Lightbridge reported a second-quarter loss August 5 of $1.7 million, or $0.11 per share, on puny revenue of $0.3 million, compared to a net loss of $1.0 million, or $0.08 per share, on revenue of $0.7 million in the second quarter of 2013.
The company, which has reported losses for 19 straight quarters and has reported three profitable quarters since 2006, has about $3 million in cash and working capital, so it's going to have to rely on financial markets for several years to stay afloat until serious revenues develop. Its fairly low market cap of $44 million is a plus.
The stock, which has had three spikes above $3 in the past year, is 23% off its March high of 3.79. I am using a stop just below its August low of $2.52 and am looking for a modest pullback.
MPLX LP (MPLX) is a fee-based, growth-oriented master limited partnership formed by Marathon Petroleum to own, operate, develop, and acquire pipelines and other midstream assets related to the transportation and storage of crude oil, refined products, and other hydrocarbon-based products.
It holds a majority equity interest in a network of common carrier crude oil and products pipeline assets located in the Midwest and Gulf Coast regions and a 100% interest in a butane storage cavern located in West Virginia.
Second-quarter revenues reported July 31 increased 10% to $134 million, while income rose 42% to 37 cents per share. The MLP has $43 million in cash and a bank credit line of $245 million to pursue growth opportunities. The dividend has risen for six straight quarters and offers a 2.1% yield.
MPLX has put together a nice stock chart since coming public in October 2012. The stock rose 47% last year and has tacked on another 42% this year.
It pulled back as much as 18% off its July 2 high of 67.65 as energy proxies tanked in late July, but it has since risen back above its 50-day moving average with two straight winning weeks.
Pioneer Energy Services (PES) provides contract land drilling services to independent and major oil and gas operators in Texas, the Mid-Continent, Rocky Mountain and Appalachian regions, and in Colombia.
The company also provides well, wireline, coiled tubing, and fishing and rental services to producers in the US Gulf Coast, offshore Gulf of Mexico, Mid-Continent, and Rocky Mountain regions.
The stock rode a series of strong earnings revisions to a seven-month win streak that ended with a 16% loss in July. It's down another 2% this month after piling up five straight weeks of losses after making a high at $18.40 July 16.
Volume is drying up, though, and I think last week's low of 13.75 has a good chance of holding up before another leg up begins. The stock is up 104% this year even after falling 22% off its high.
Losses of $0.19 per share in the past four quarters are expected to morph into gains of $0.71 in the next four, giving the stock a forward PE of 20. PES trades at a slight discount to annual sales of $981 million.
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