I don't like to traffic in takeover names. Far too often they end up being spoilsports that really hammer you, and you end up losing far more than you have ever gained if you finally hit.
Occasionally, though, you get a stock that's up big on what looks like takeover action that won't kill you if you don't catch a bid. And then, on very rare occasions, you get not one but two potential targets that are worth buying even without a takeover bid.
Today is one of those days. Both Core Laboratories (CLB) and Pioneer Natural Resources (PXD) are up huge today. Until this year's bizarre trading decoupling between stocks and the commodities in the oil patch, we've see a whole host of mergers that have been terrific for all involved.
We've seen huge deals in both the service side and in the independent oil side.
Maybe it's heating up again. Core Labs is a technology stock that happens to be in the oil business. It tells you how much oil is in the ground before you go wasting millions of dollars. Pioneer Natural is a terrific oil and gas company that I have loved for some time because of its earnings prospects and tremendous growth -- about 75% as of earlier in the year.
Core is about $6 billion, Pioneer about $13 billon. Considering that finding oil is more lucrative than ever and that natural gas, a big part of Pioneer's portfolio, is a necessary export item for many a foreign national firm, both Core and Pioneer work as buys, despite these large run-ups.
Is something happening? The stocks, which have bucked this current downtrend, give a resounding yes. The options market? For Pioneer yes, for Core Labs no.
I know oil has become totally toxic, the anathema of performance, but these two stocks can still do well for you. Of course, I would do them in deep-in-the-money calls and not common. Too much to lose. I might even take some out-of-the-monies. The action is just that odd in them.
Remember, if there is no deal, they are going to get hit, but not hit beyond recognition. And if there is a deal?
To the moon!
Random musings: I believe that the Saudis must be pumping like mad. I think that, and not the potential releases from the Strategic Petroleum Reserve, is behind oil's fall. What makes me think that? How about the run in Nordic American Tankers (NAT), the biggest tanker company in the world. It has been a burn- the-house-down stock with a huge yield to boot.