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2006-10-18 :: Morgan Stanley Energy Analysis

So, to show how dull my Wednesday nights are, I am reading a Morgan Stanley energy sector analysis report.  I am getting some consolation from reading it and want to share it with you.

They have lowered their expectations, yet the names we own are still at the top of their recommendations with huge 18 month upside.  They are still worth holding in spite of the weakness in the group since May.  In fact, we have an overweight position on the sector even after cutting back on exposure over the last month.

Here are some of the upside targets over the next 18 months Morgan Stanley has for names in our Universe:

Schlumberger +70%
Dril Quip +41%
Grant Prideco +34%
Baker Hughes + 49%
Smith International + 50%
Haliburton + 36%
Tenaris +46%
W-H Energy +49%
Noble +28%
Todco +29%
Ensco + 20%

In the nearterm, we will likely continue to see ups and downs in the energy sector.  As the names have been recovering, we’ve used trailing stops that follow the stock prices up.  This is to protect the price gains in some names so that if the prices contract and we are stopped out we can add to the names we have the greatest confidence in.  Particularly, we want to add to Schlumberger, Haliburton, Dril Quip, Tenaris, Smith International, and W-H
Energy, and we’ll use any proceeds from stops to add to these positions.  This is an active strategy, but one that will ultimately prove to make a lot of money for our clients.

Many of you have had such nice words for me relative to losing my Black Lab, Manny, this summer.  Well, the photo above is of my new puppy, Trip.  He’s 8 weeks old in this photo and is turning into a real live Tasmanian Devil!  He is a Wirehaired Pointing Griffon and will end up at about 60 – 65 lbs, although he’s only about 8.5 lbs in this photo.  He’s a lot of work at this age, but I’m sure he’ll turn out to be a great dog.

More later!

Mark