Tim Brown: Unit Corp. Drilled - TheStreet

Tim Brown: Unit Corp. Drilled

With demand for oil falling, this contract driller is poised to drop.
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I have spoken a lot about going long in my columns. In fact, that's what I usually recommend. By going long, I pick solid companies that I think are undervalued but that will help us make money in the long run. It requires patience, discipline and smarts.

In football, going long is going for the big score quickly. When a wide receiver goes long, he tries to get by the defenders and catch a long pass from the quarterback. It's certainly not an easy play to pull off, and if you go to the well too often with the same play, the defense will expect it. That's why it's important to mix up your play-calling.

Mixing in plays on the ground to keep the defense honest is important. So is running crossing routes over the middle of the defense to keep the defenders on their toes. Basically, going long all the time in football just doesn't work. If it did, teams would be throwing 40-yard passes every down and moving the chains constantly. In order to set up those long completions, teams have to mix it up.

And that's exactly what I am going to do today. For the first time ever in one of my columns, I am recommending shorting a stock.

For those of you not familiar with shorting, it involves borrowing shares of a given stock from a brokerage house and then turning around and selling them to another investor. At a later date, you must buy the shares back, or cover the position, in order to return them to the broker.

The hope is that the stock will go down significantly. If it goes down, you can profit on the difference between its price when you sold it and its price you bought it back. The danger here is if the stock goes up, not down. Theoretically, your losses could be endless.

Now, onto the play:

Unit

(UNT) - Get Report

. The company operates as a contract driller. It has three segments: contract drilling, oil and natural gas, and mid-stream. The contract drilling portion engages in the drilling of natural gas and oil wells, while the oil and natural gas segment is involved with exploration and development.

The stock ran all the way from about $45 a share in December to more than $85 a share earlier this month, but lately it's been falling fast. Oil has taken a hit this week, and Unit closed at $73.92 on Thursday.

According to a

New York Times

article, a report that comes out each week from the Energy Department, commercial oil inventories rose on Wednesday. They were expected to fall.. However, oil that was expected to be refined went into storage instead.

Another recent survey, this one by Mastercard, showed that consumers are steadily reducing their use of gasoline as prices at the pump soar. Consumption fell 5.2% last week, the 12th week in a row that it's shown a decline.

With demand falling and analysts predicting a further slowdown, I think Unit is in for a drop.

Whether it's short or long, it's important to chew up yardage.

Keep moving the chains!

At the time of publication, Brown had no positions in stocks mentioned, although positions may change at any time.

Tim Brown played 16 seasons in the NFL, where he made nine Pro Bowls. After a brief stint with the Tampa Bay Buccaneers in 2004, Brown retired as an Oakland Raider. He was a Heisman Trophy winner in college for Notre Dame.