After the recent handwringing over the likelihood of a double-dip recession, it feels good to have some good news to talk about.
BP (BP) appears to have capped the oil leak from the Deepwater Horizon rig, which means oil isn’t gushing into the Gulf of Mexico for the first time since April. All but seven European banks passed their stress tests. There was a slew of strong corporate earnings and forecasts of more to come.
I’d been urging BP shareholders to hold on until some good news arrived, and now it has. After dipping below $27 in June, shares were recently at $38. Not only has the well been capped, but BP announced it was selling $7 billion in assets to energy firm Apache (APA).
This strikes me as an opportune time to exit BP, if you own it. As I’ve said before, BP has turned into a special situation stock, with its price hostage to the costs and lawsuits it faces as a result of the spill. If you have an appetite for volatility, BP may well pay off in the long run. That could take years.
If you own BP for exposure to the energy sector, why not swap into Apache? It’s a well-run company that is now acquiring choice assets in the U.S., Canada, and Egypt, all of them land-based. BP has chosen to retain its deep-water reserves, and it certainly should have gained some expertise in managing the risks of deep-sea exploration. But with a moratorium on deep-water offshore drilling in the U.S., land-based energy assets look all the more attractive.
Investors breathed a sigh of relief over the results of European bank stress tests, even though some analysts complained that the stresses didn’t include a sovereign debt default. The Europeans insist that’s never going to happen, and I’m willing to take them at their word. I think many European banks now look attractive, although I would avoid the Swiss banks until the ongoing bank secrecy and tax evasion issues are resolved.
I especially like Spain’s Banco Santander (STD). Santander shares have been dragged down by worries about Spain’s economy and Santander’s stake in the top-of-the-market ABN Amro acquisition, but the firm fared surprisingly well in the stress tests, with its Tier 1 capital remaining at a healthy 10% in 2011, even in the worst-case scenario. Santander has a significant presence in fast-growing Latin America. (I don’t own shares, but it’s on my shopping list.)
Santander shares jumped on news of the stress tests, but at a recent price of $13.44, they’re still well below the nearly $18 they hit last fall.
Many companies whose stock I own have reported strong earnings recently, but one that didn’t make headlines was especially satisfying: Chipotle Mexican Grill (CMG), which I recommended (and bought) in February. Key metrics all gained: revenue (up 20.1%), net income (31.3%), comparable store sales (8.7%) and margins (90 basis points). Shares jumped more than 9% on Friday and are up about 48% since my recommendation.
Judging from lines in the branches in my neighborhood, Chipotle’s emphasis on fresh, healthy ingredients and reasonable prices should keep paying off.
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Investing § After Double-Dip Rumble, Some Good News: Stewart: Good summer tidings from energy, finance and fast http://url4.eu/6UxqQ
After Double-Dip Rumble, Some Good News (Common Sense) (source: Smart Money) http://nxy.in/03rgw
RT @SmartMoney: After Double-Dip Rumble, Some Good News http://bit.ly/9WDllC http://ff.im/-on2Ox
RT @SmartMoney: After Double-Dip Rumble, Some Good News http://bit.ly/9WDllC
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