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Jim Cramer's Action Alerts PLUS

Drilling Down on 4 Energy Positions as Oil Rallies

By Jim Cramer and the AAP Team | 2017-06-28 16:32:21.0
Stocks in Focus: APA, MMP, XEC, SLB

Oil continued its recent rally Wednesday, with crude prices now approaching $45 per barrel. The rise was sparked by encouraging information from the U.S. Energy Information Administration on inventory levels. The EIA reported that crude inventories increased 100,000 barrels for the week ended June 23. Although inventory rose, the actual figures were well below the projected increase of 800,000. As a result, Apache (APA) , Magellan Midstream Partners (MMP) and Cimarex (XEC) all traded higher for the day. Conversely, Schlumberger (SLB) was roughly flat.

At a recent conference with J.P. Morgan, Apache CEO John Christmann spoke about how it expects production to climb at Alpine High. The company is looking to transition to the development phase of the project as it tests and optimizes in all windows and within multiple zones. Apache's willingness to increase production while oil remains depressed shows confidence that the company can remain profitable based off its low all-in cost model.

At the same conference, MMP CFO Aaron Milford also presented. The company has more than $500 million in development project backlog that includes both crude oil and refined products. In addition, MMP expects expansion at three Houston area terminals currently under construction to add more room for expansion. The company's business model is more fee-based than related to the underlying price of oil, and expansion projects to keep pace with domestic production is a positive signal for the company.

In a conference call with J.P. Morgan, Cimarex CEO Thomas Jorden said, "We're not interested in production growth for growth's sake." He also reinforced Cimarex's balance sheet by saying, "...in a $40 to $45 oil world and $2.50 gas world, we're in very good shape." It was encouraging to hear straight from the CEO that the company is not intimidated by current price levels, and will only increase production with respect to its rate of return.

Additionally, in a report from Stifel, analysts pointed out that Cimarex was trading at a discount compared to its peers. They view Cimarex as a high-quality, low-cost producer that is currently being undervalued based off its EV/EBITDA multiple of 4.9x being 18% lower than the peer average of 6.0. We have maintained our position in the company, as we believe its fast-growing business model can continue through depressed oil prices.

There was no specific news relating to Schlumberger on Wednesday. We reiterate our outlook that SLB represents the best oil-services outfit in the business.

We are remaining patient with our oil positions. Although the recent bump in oil prices has been encouraging, we are looking for more fundamental news that changes our long-term outlook before we take any action. We will continue to provide updates on the commodity and our oil positions on more announcements.

Action Alerts PLUS, which Cramer manages as a charitable trust, is long APA, MMP, XEC and SLB.

Updates on Snap-On, Dow-DuPont and Arconic
Stocks in Focus: SNA, DD, DOW, ARNC

Snap-On accounting gots another look from Oppenheimer.

06/28/17 - 01:35 PM EDT
An Update on Two Deals, and Another Round of Stress Tests
Stocks in Focus: QCOM, NXPI, WDC, C, KEY, WFC

Qualcomm extended the deadline for its NXPI offer, and there was a new development in the WDC-Toshiba chip unit sale.

06/28/17 - 10:23 AM EDT
Weekly Roundup
Stocks in Focus: ADBE, TJX, PEP, LUV, ABT, AGN, APA, XEC, CSCO, CMCSA, DHR, DXC, EZU, FB, GE, GOOGL, KEY, MMP, NUE, SLB, SNA, WFC, AAPL, ARNC, C, DOW, NWL, NXPI, SBUX, WBA, WDC

Tech rotation, oil and Fed rate hike keep markets on even (flat) keel. Several portfolio positions get beefed up.

06/23/17 - 06:14 PM EDT

Markets

Chart of I:DJI
DOW 21,454.61 +143.95 0.68%
S&P 500 2,440.69 +21.31 0.88%
NASDAQ 6,234.4143 +87.7916 1.43%

Action Alerts PLUS Holdings

Holdings 1

Stocks we would buy right now

Symbol % Portfolio
Weighting
Industry
ABT 0.008983324448279437 Health Services
AGN 0.050286789853517366 Drugs
APA 0.0393076034491237 Energy
CMCSA 0.029544167698714388 Media
CSCO 0.03566646637386192 Computer Hardware
DHR 0.03610673821563404 Health Services
DXC 0.02905497676341204 Computer Software & Services
EZU 0.01520568490564791
FB 0.056790620398281394 Internet
GE 0.023688700442822674 Industrial
GOOGL 0.05314725972785915 Internet
KEY 0.013623226349783503 Banking
MMP 0.031268195146461744 Energy
NUE 0.039881846899313844 Metals & Mining
SLB 0.03385423631808278 Energy
SNA 0.03755948705380463 Industrial
TJX 0.04498963028249913 Retail
WFC 0.041247690226629594 Banking
XEC 0.03112588505619197 Energy
Holdings 2

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Industry
AAPL 0.04409159431702591 Consumer Durables
ADBE 0.015988761001325073 Computer Software & Services
ARNC 0.018833851009140305 Industrial
C 0.03492823278058747 Banking
DOW 0.03223054860195142 Chemicals
LUV 0.020682770385067124 Transport
NWL 0.023734654742805623 Consumer Durables
NXPI 0.02240086824571991 Electronics
PEP 0.025878200477494083 Food & Beverage
SBUX 0.026318472319266192 Leisure
WBA 0.015138977050833953 Retail
WDC 0.013885610578718397 Computer Hardware