27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Southwestern Energy will officially kick off third-quarter earnings season on Thursday for E&P (exploration and production) energy firms as oil volatility continues to make investors nervous.
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In a report published Wednesday, Thomas Driscoll of Barclays maintained a sector-wide Negative rating, noting that his EBITDA estimates for Large Cap E&P firms is on average 2 percent below consensus estimates. The analyst added that it is likely many companies have slowed their completion activity during the quarter in response to low oil prices while fourth quarter volumes may be at risk.
Driscoll continued that his analysis points to inflated sector-wide valuations, as E&P shares appear to reflect $80 per barrel oil. On an EV to forward debt-adjusted cash flow (EV/DACF) basis, shares are trading at an 8.0x multiple, 33 percent above their historical average (dating back to 1994) and approximately 20 percent above their five-year average. Accordingly, the analyst suggested shares need to decline by 20 to 30 percent "to get to fair value."
Recommendations
For investors looking to build a position in the sector, Driscoll recommended owning shares of Canadian Natural Resource Ltd (USA) (NYSE: CNQ) – his "most fundamentally undervalued" name, which is trading at a 30 percent discount to its peers. Moreover, the company is transitioning to a "long-lived, low-maintenance and low-decline" production profile which isn't reflected in the "annuity-like character of its asset base." The analyst maintained an Overweight rating and C$35 price target on the Toronto Stock Exchange listed issue.
Driscoll also highlighted a relative Overweight rating on EOG Resources Inc (NYSE: EOG) ($87 price target), Noble Energy, Inc. (NYSE: NBL) ($36 price target) and Southwestern Energy ($18 price target).
Image Credit: Public Domain27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.