Adding Petrobras to Secular Trends Portfolio
Posted on | September 12, 2008 Time: 4:04 pm |
Echoing what I just had to say about Potash Corp, I had Petrobras (PBR) on my extremely short list of pickups earlier in the week. When the bottom dropped out of energy and commodities earlier in the week, several companies stood out as the beneficiaries of panic selling. Petrobras shed over $17 billion in market cap in a single day on absolutely no news, and great companies like BTU, BUCY, VLO, and JOYG were hammered to the tune of about 25% in less than a week.
No one questions the influence of crude oil in our markets and economies, but whether or not hedge funds are to blame (the most recent cause of Jim Cramer-vitriol, but certainly not the last) the sell-off was too severe.
In the short term it looks like the Secular Trends Portfolio is overweighted towards energy and commodity plays, but this will even itself out shortly as the other sectors get their representation.
Petrobras’s chart is below, and while I won’t ever base a decision on technicals, the trendline looks the same here as it does for BTU and POT…I wouldn’t be surprised to see the snap back continue in the short term barring an act of God on crude oil prices (although even acts of God should be considered, especially with Ike rampaging through the Gulf).
The long term thesis is of course what matters, and PBR has a lower forward P/E than even stodgy Exxon Mobil (XOM) and known reserves out the wazoo; they have been working hard to vertically integrate themselves in recent years, and their operations are much less sensitive to known hurricane paths.
Setting up a 2% position, and looking to do half now and half later, pending any new volatility in crude oil prices.
Picked up 2% position (446 shares) at $44.82; once this position is fleshed out I will have the portfolio where I want it for the energy sector. Next up will be some staples names and some healthcare names, along with my outline for overall sector diversification.
Ryan Barnes
Tags: BUCY > Coal > JOYG > Petrobras > Secular Trends Portfolio > Valero
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