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Cricket World Cup - 3rd biggest show on earth!

On Valentine's day, third biggest show on earth started it's latest incarnation in Australia/NewZealand (first and 2nd would be Olympics and Soccer WC). And what a start with most awaited India-Pak match. I was glad that India outplayed Pak in every aspect of the game and won the match convincingly. Hope "boys in blue" can repeat this performance in all games including knockout round which would be in March (the tournament goes on till Mar 28).
Now let's look at geo-politics and its impacts on markets. Since my last blog in which I recommended 15 investment ideas, markets are on fire especially energy stocks. That makes sense for multiple reasons. First of all there was "irrational pessimism" in oil markets which pushed down crude to mid-40s and pundits were predicting it to go down to 30s. Crude came down by more than 50% just over 2-3% gap in supply-demand. If we look at normal macro-economic principles, it just did not make sense. However crude markets are known for booms and busts. Last two weeks few factors changed.
  • Oil rigs started coming down by non-significant numbers - this means future supplies would come down addressing the fears of over-supply
  • Capex investments at many oil companies are cut by 20-30% further reducing fears of oversupply
  • Geo-politics became favorable with Merkel trying to address Russia/Ukraine and Greek issues in same week
  • Growth in China, India and most likely Japan coming back raising possibility of demand for crude increasing
Crude markets realized this and started pricing crude accordingly causing it to jump by more than 20%. So is it too late to invest in "oily" companies. If we look at what happened in 2009 with banking and financials, it's not late at all since there are many investment opportunities which could return 20-100%. Let's look at some of these. (usual disclaimer goes without saying - these are risky investments and do your due-diligence before investing)
  1. RIG at $19
  2. FCS at $19
  3. VALE at $7.50
  4. PWE at $2.40
  5. LNCO at $12
  6. OIL at $11.50
  7. XLE at $80
  8. EXXI at $3.50
  9. GDPAN at $9
  10. PEIX at $9
That's all for now. Have a great President's Day!
/Shyam

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