Energy stocks are on fire

With Syria about to be on the receiving end of a Tomahawk missile strike, a surge in crude oil is pushing up the sector.

By Anthony Mirhaydari Aug 28, 2013 3:06PM

copyright Kevin Phillips/Digital Vision/age fotostockAll eyes are on the West's naval assets in the Mediterranean as we await a cruise missile strike on Syria in response to the Assad regime's horrific chemical weapons attack. 

 

Wall Street is already responding to fears sectarian violence will spill over into Iraq and other key oil-producing regions. West Texas Intermediate is trading above $110 a barrel, a level seen briefly over the last few years, and is only a hop-skip-and-a-jump away from the $115 peak hit in 2011. 


Of course, a surge of inflation now would be bad, bad news since it would force central banks to lay off the stimulus, would damage consumer confidence, and would threaten a nascent reacceleration in the global economy.

 

But for now, there is money to be made as the rise in oil prices boosts energy stocks in a big way.

 

Just look at the way the Energy Sector SPDR (XLE) is enjoying a surge of relative performance against the S&P 500 on a scale not seen since way back in January. Big mega-cap names are participating, including Exxon Mobil (XOM) and Chevron (CVX).

 

 

But the real action, in my mind, are in the smaller, fast moving stocks that provide an opportunity for nimble traders to get in, grab a quick profit, and get out before the negative consequences of higher oil prices are discounted.

 

There is a reason that oil above $110 a barrel hasn't been sustained when it happened in 2011 and again in 2012: The economy and the stock market are still far too dependent on cheap money stimulus from central banks.

 

Low inflation is the lynchpin holding this jalopy together. Without it, investors would panic. Just look the reaction since the Federal Reserve started talking about merely slowing its pace of stimulus (not stopping it, and far from actually removing stimulus) back in May. Interest rates have surged. The market has oscillated. Investors have doubled their daily antacid dosage.

 

I'm recommending clients consider two names. The first is Hyperdynamics (HDY), and independent oil and gas company that operates off the coast of Guinea in West Africa. Shares have been building a base of support near current levels for two years, and are poised for an upside breakout as price move above the 200-day moving average.

 

 

The other is Sonde Resources (SOQ), a more speculative play that operates in Western Canada and off the coast of Tunisia in North Africa. Shares have been in a persistent downtrend since January, but are now enjoying a surge of buying interest on very strong volume. A similar breakout late last year took shares as high as $1.90 a share. A return to that level would be worth a 100%+ gain from here.

 

I've added both SOQ and HDY to my Edge Letter Sample Portfolio.  

 

 

Disclosure: Anthony has recommended SOQ and HDY to his clients.

 

Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​om​​​​​​​​​​​​​​​​​​​​​​​​ and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.


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36Comments
Aug 28, 2013 4:08PM
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Ok...

1)  Consumer confidence is at 0%

2)  The 99% have taken 99% of the financial burden since 2008/2009

3)  The 99% have supported dictators in the Middle East and Central America for decades via our Government and what have we to show for it - HIGHER PRICES FOR OIL and everything else

4)  The 99% has 0% FAITH in our elected officials

5)  Only cure for all this mess - A SECOND AMERICAN REVOLUTION!

 

Aug 28, 2013 4:01PM
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And this is a good thing ? Sure , right in front of the last holiday weekend of the summer . Call it what you want , this is another in the continuing example of how to rip off consumers . At least they could have waited for people to gas up to get home from the weekend before raising the price at the pump !
Aug 28, 2013 4:31PM
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If we only had a government.

 

Take money from people that pay taxes for THIS  country to spend it on people who hate our guts and get nothing in return.

 

Let the middle east pay our politicians. Hell they do more for them at our sacrifice. All a F'N SCAM!!!!!

Aug 28, 2013 3:17PM
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on fire today..what is the difference from yesterday...when same message was there on oil.  another stupid forecaster.
Aug 28, 2013 4:17PM
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A war in Syria means inflation at the gas pump and higher government costs. If Obama had a responsible energy policy we would not have to be involved.

Aug 28, 2013 3:39PM
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Foreign Policies: Have we all forgotten about Enron

 

Isn't it funny how that Exxon, Mobil and Chevron are the same people that control

foreign  policies in the Middle East for the U.S.

Aug 28, 2013 3:48PM
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Of course those energy/  oil stocks are UP.  Although This   volatility was expected in this scenario. Syria has been cooking for 2 years, and no definitive steps have been taken to either resolve the issue or  address this ongoing  situation.
 The problem that I have with this, is that we are sitting on so much of our  own resources, yet we do not capitalize on them due to environmentalist and political  positioning.
 The Canadians have chastised  us for the FOOL we are  for not accepting the Keystone pipeline.
 We have turned into the biggest PROCRASTINATORS in the world, indecisiveness rules supreme on so many fronts.
 Will we ever wake up, I doubt it.
GET READY TO PAY HEAVILY AT THE PUMP <><><><> AGAIN<><><><>
Aug 28, 2013 4:50PM
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I am glad oil is on fire, but as far as I am concerned, my wallet will not because I will cut back on spending even more then before. Take your oil you Greedy Morons and shove it up your Arses.
Aug 28, 2013 5:14PM
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Great idea, lets get involved with another middle eastern countries civil war.  We never learn a damn thing. 
Aug 28, 2013 3:50PM
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Sorry but I don't call up 2% on fire. Get real. When they are up 20% then lets talk. Most oil companies are running a P/E  in the 10's and dont go up much while you have a company like Tesla that is really on fire up 300% or more for the year with a 200 P/E which is unreal.  

Aug 28, 2013 4:22PM
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another reasone for them to screww the little people

 

Aug 28, 2013 4:54PM
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Yes this would be true after oil prices jump up everyone knows people have to pay more in electric..

 

No brainer

Aug 28, 2013 4:26PM
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OIL AT A ALL TIME HIGH UNDER BARRACK OBAMA ONE AGAIN

 

Aug 28, 2013 3:48PM
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It's people moving money around because they are fearful, paranoid, ignorant and greedy. Which of those aspects helps America? I will remind readers AGAIN that right now, most of the QE is contained in the markets, once it starts a buying frenzy out of anything that has a purchase price, America will be destroyed in the Chaos. Too bad we don't have REAL people in DC... just puppets. Today was a good day to shut the spigot off and let the markets fall as they may. Instead, we are setting ourselves up for cataclysmic collapse. What good will your degree and I-Phone do you then, idiots? 
Aug 28, 2013 5:08PM
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Of course, the titans of Wall Street will make money off of everyone else's misery.
Aug 28, 2013 6:47PM
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The price of Oil is HARDLY at an ALL-TIME HIGH....Put that FALLACY to rest.

 

We have been attempting DIPLOMACY with Assad's Regime for well over a year, also working with allies of his Regime....Put that FALLACY to rest.  Isn't the word REGIME all telling ?

 

I don't think we get any Energy products from Syria..? Someone else can prove that FALLACY.

 

I don't think "American Oil Companies" are members of OPEC...Maybe another FALLACY?

Do many of you blow shidt and lies without checking any kind of FACTS, how are you credible ?

Aug 28, 2013 5:08PM
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The same day that Kerry announced his intention to attack Syria the fed noted that the government only has six weeks of solvency left.  So which item caused Tuesdays rout?  When congress puled their weekend $300 billion credit increase last month it was was followed by the end of six months of steady gains in the stock market.  Just because an event isn't printed at the top of every new column does not mean that it is not a major cause for market corrections.  Most smart money managers read all the news, not just what is popular.  So you can blame it on a few missiles being fired into the near east while I'm much more concerned about the inability of the government to continue payments on $57 trillion of debit to the social security department.
Aug 28, 2013 7:44PM
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O.P.E.C....Oil Producing Exporting Countries...

Gathered "some" of this from Wikipedia....But Wiki admits, some of recent info may be incorrect..

Doing this for enlightenment of "some."

 

Founded in about 1960, With Venezuela and Iran, bringing on board Iraq, Saudi Arabia and Kuwait.

BTW...Venezuela is the "only" Country in Western Hemisphere that belongs to OPEC.

Today there are roughly 12 Member Nations; Headquartered in Vienna, Austria.

NO actual "Oil Companies" belong to OPEC. (although some may be Nationalised)

And certainly "no American Oil Companies."

GLAD TO HELP....

Aug 28, 2013 4:25PM
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why are we being screwed again and again when we will take over all producing ranks in the world   number one,  USA OIL COMPANIES NEED TO GET OUT OF OPEC AND QUIT SCREWING US

 

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