Undervalued Indeed

Written By Nick Hodge

Posted October 29, 2011

Citing the intense merger and acquisition activity in the oil and gas space, and highlighting the record third quarter investment in clean energy, I told you last Friday:

The truth is energy shares — almost across the board — are currently trading at a discount.

And if you’re in the mood for some easy longer-term gains (and even dividends), you’d be well advised to go bargain hunting over the next few weeks.

If cheap oil companies with access to North America’s fossil fuel rebirth are a good buy for Sinopec and Superior and Statoil and BHP and Kinder Morgan… it stands to reason they’re a good buy for you, too.

The logic here couldn’t be any simpler or more straightforward. Many oil stocks are undervalued.

All while cleantech stocks had one of their worst quarterly performances ever.

The front page story — Solyndra, Evergreen Solar, etc. — is a stark contrast to the bullish data being buried on the back page.

Like with oil, companies in this sector are cheap as well.

I mentioned that the NYSE Energy Sector Index (^NYE) and the WilderHill New Energy Global Innovation Index (^NEX) had fallen further than the Dow over the last six months… and that I was bullish on Yingli Green (NYSE: YGE), JA Solar (NASDAQ: JASO), and Transocean (NYSE: RIG).

Sorry for the repetition, but I wanted to highlight the value of the insights published in this letter and poke a little bit at the accountability of “mainstream” financial journalism.

Like I See It

I call it like I see it.

My columns are dedicated to explaining the real factors driving the market — not just regurgitating the PR being put out by companies and analysts.

Was I right about oil and solar stocks being undervalued last week?

Undervalued Energy Stocks

Yep. Every index and stock I mentioned has added more value than the Dow over the last five days.

Yingli, the stock I told you I owned personally, has tacked on as much as 25%.

I’m bullish on energy. And I pass along the best ways I see to play it while remaining realistic about technological limitations, the speed of policy, reserves, sustainability, and the broader market.

I have a single thesis and continually update you on it: I’m bullish on energy. I think the entire sector (oil, gas, nuclear, renewable, efficiency) is in for immense appreciation as population explodes and resources remain constricted. I don’t waiver from that.

What do you get in a flavor-of-the-day rag like the Wall Street Journal? I’ll show you:

  • Solar-Panel Firms’ Outlook Dims by Cassandra Sweet, October 4

  • Solar Firms Look to Shed Their Gloom by Cassandra Sweet, October 17

In the first, Cassandra tells us:

Solar-panel company stocks have plunged to multiyear lows as slowing demand and a glut of panels from Asia have squeezed margins, creating a cloud that could hang over the industry for some time.

And in the second:

With the bankruptcy and federal probe last month of California solar-panel maker Solyndra Inc. and the free-fall of solar-company stocks over the past several weeks, the view of the global solar-power market may look dim or even grim. But is it?

Based on a WSJ article from October 4, Cassandra, I have to say it is. Though that contrasts sharply with the sector’s performance over the last week.

I guess the “cloud that could hang over the industry for some time” burned off pretty quick…

I’m still bullish. The WSJ — and its peers — will continue to not have a clue about what’s going on.

Call it like you see it,

Nick Hodge

Nick Hodge
Editor, Energy and Capital


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