It's so good. Once it hits your lips, it's so good.
As Will Ferrell's Frank the Tank says in Old School, there's something about returning to an old pleasure that is extra satisfying. Frank was referring to beer, but I try to focus my Real Money columns on a less tasty pursuit, investing.
In the midst of the orgy of animal spirits that has been the U.S. stock market in 2019, there are still undervalued names. In my Real Money column Nov. 22, I highlighted three such names as core holdings in the portfolio of my trading venture, Excelsior Capital Partners -- Chesapeake Energy (CHK) , Antero Resources (AR) and Antero Midstream (AM) .
In the past month these names have gone completely bananas, much to the benefit of Excelsior, even as natural gas futures prices have barely budged despite the cold weather, with the front-month natgas futures contract quoted at $2.25/mmcf in Thursday's trading.
So, it is tempting to just present the numbers, throw up one's hands, and just sit back, relax and enjoy the torrent of green on my screen. Those numbers are:
11/21 close: $0.58
12/19 midday: $0.96
% change: 66
11/21 close: $2.04
12/19 midday: $3.00
% change: 47
11/21 close: $4.87
12/19 midday: $6.79
% change: 39
I do at least attempt to dig more deeply into the fundamentals, though. The shift in sentiment in the E&P group has been driven by the sharp rebound in crude oil prices. Oil prices are moving in lockstep with the go-go stock market, and today's quoted WTI futures price of $61.25 represents a level that is extremely profitable for oil producers.
That doesn't jibe with the incredible performances of CHK, AR and AM over the last month, though. Only one-quarter of Chesapeake's production is composed of black oil. Antero Resources and its sister company Antero Midstream are involved solely in the production and transmission of natural gas; both companies have zero exposure to crude oil.
So, what is really happening?
We are in the midst of a short squeeze of epic proportions. This is also evident in the performance of other stocks, notably Tesla (TSLA) , in the past two weeks, but delving into the short interest data on my three names shows there is still more gas to be poured on their stock market fire.
Short interest as a % of float 12/15: 14.71%
Change from 11/30 level: -5%
Short interest as a % of float 12/15: 16.73%
Change from 11/30 level: +1%
Short interest as a % of float 12/15: 18.78%
Change from 11/30 level: -5%
So, in retrospect, I wish I hadn't collected the ridiculously high premia available for options sellers and partially protected my positions in AR, AM and CHK with short calls. Hindsight is 20/20, of course, but caution is always warranted.
Frank the Tank told his wife that he had "taken the restrictor plate off the Red Dragon" to give his car that much more juice. In a market that is insanely overvalued -- with the S&P 500 having crossed the 20x forward P/E threshold in Thursday's trading -- I am happy to have some short options protection while benefiting from the misplaced pessimism of energy sector shorts.