Micro-Cap Monday - Our Energy Picks Are Crushing It (So Here's One More)
Hi and good morning.
I hope you had a fine Mother's Day yesterday. Even if you're not a Mom yourself...
I'm willing to bet you at least have one.
The market had a crazy time of it during the week that just passed. All five of the major averages we track lost ground. But what's interesting is the manner in which they lost it.
As you can see in the image below, the S&P 500 and the Dow Jones Industrials and S&P lost barely a quarter of a percent each.
But those near-sideways moves belie the gut-churning ups and downs they endured.
(Click any image to enlarge)
On Wednesday the market shot up nearly 1,000 points...
While on Thursday the market sank more than 1,000 points.
That kind of whipsawing volatility is enough to send all but the hardiest (or foolhardiest) investors running for the exits.
That said, you've heard us say many times that, "there's always a bull market somewhere."
And right now that happens to be in commodities, especially energy.
In fact, recent Micro-Cap Monday Oil & Coal sector stocks have done very well indeed.
CDEV: Recommended on 3/25/22 at $8.65. Reached an intraday high of $9.58 on April 18 = Up 10.7%.
HDSN: Recommended on 3/18/22 at $6. Reached an intraday high of $9.70 on May 6 = Up 61.6%.
EPM: Recommended on 2/14/22 at $5.52. Reached an intraday high of $8.17 on March 7 = Up 48%.
CPLP: Recommended on 1/21/22 at $15.47. Reached an intraday high of $19.65 on March 28 = Up 27%.
EPSN: Recommended on 1/7/22 at $5.66. Reached an intraday of $7.99 on May 4 = Up 41%.
Not too shabby.
Today we're going to go to that same (oil) well again with another stock from the #1-ranked Oil and Coal sector.
The sector's bullish percent index (BPI) chart is in an ascending column of X's and is on a point-and-figure Buy signal. That means we should consider the sector strong over the short term as well as over the intermediate to longer term.
On a relative basis, the sector is out performing the wider stock market, the Equally Weighted S&P 500. (The S&P you hear about on the news is cap-weighted. The larger stocks have more "votes" regarding the level of the index. For that reason it doesn't give us as clear a picture of the true state of the market.)
As you can see the chart is also in a column of X's and on a Buy signal. That means, again, that the sector, compared to the market, is to be considered strong over both the short as well as the long term.
Amplify Energy Corp. (AMPY) out of Houston, TX, acquires, develops, and produces oil and natural gas properties in the United States. (Oklahoma, the Rockies, federal waters offshore Southern California, East Texas/North Louisiana, and Eagle Ford.)
As of December 31, 2021, the company had total estimated proved reserves of approximately 121.2 million barrels of oil equivalent as well as 2,417 gross producing wells.
When we plug AMPY into the Position Key (one of the institutional-quality tools that comes bundled with Sector Prophets Pro, our sector research and data platform) we see nothing but good news.
Read from left to right, those blue arrows mean that...
- The Oil & Coal sector is on bull confirmed status on its BPI chart, the strongest designation.
- The sector is strong versus the wider market.
- AMPY is outperforming its sector peers on a relative basis.
- AMPY is outperforming the wider market on a relative basis.
In a second, I'll show you how AMPY is also outperforming its competitors.
First, here's something you need to know about. This Wednesday (5/11) at 12:00PM EST Chris Rowe is hosting a brand new live Q&A event on Facebook. This is only the second time Chris has reached out to individual investors in this way. (The first one was an unqualified success!)
As you know the markets have been nuts lately. Chris feels that social media is a great, easy way to reach folks who...
- Have burning questions about this market...
- Want to know how to navigate, survive and prosper in it right now.
These event are extraordinarily insightful and a whole lot of fun.
Do yourself a favor and join Chris at 12 noon EST on Wednesday. You can bring your questions as well.
OK, back to AMPY...
Below is a "performance chart" (or "perf chart") showing how the stock (the red line) stacks up against a basket of its leading peers, namely Comstock Resources, Inc. (CRK)... Devon Energy Corp (DVN)... Range Resources (RRC)... and Antero Resources, Corp (AR).
Amplify Energy is enjoying increasing institutional sponsorship. Between Q2 2021 and Q1 2022, the giant hedge funds bought 3.07x more of AMPY than they sold ($18.36 million bought vs $5.967 million sold).
In Q1 2022 alone the big funds bought 31.16x more AMPY than they sold.
In Q1 of 2022, and despite the loss of "Beta" production in Q4 2021, Amplify managed to generate about $15 million ($14.92 million) in free cash flow (FCF).
The company's actual 2021 Q4 FCF came in at $4 million, for a sequential increase of 275% (at a time when the oil and gas production industry's sequential FCF was down). 2021 actual FCF was $40.2 MM = an estimated increase of 11.9% to 61.6%.
AMPY has issued 2022 FCF guidance of $45 – $65 million.
Below is a 1-year daily price chart of AMPY. On Friday (5/6) the stock made an intraday high of $7.76. What's notable is that the intraday high corresponded with the 161.8% Fibonacci level (the yellow highlighted line).
The stock was unable to penetrate that key level. Should it manage to break above that line, it'll have a clear shot at the next Fibo level, the 261.8% shown highlighted in blue. That price ($10.97) represents a return of +46% above the current price.
If the stock can, long term, reach the red line -- the 461.8% Fibo level, we'll see a return of +115%.
We never try to predict where a stock or the market will go. Obviously anything can happen. (And in this crazy market, as we've seen, anything does happen...)
But I like this tiny Oil and Coal stock's chances. With war in Ukraine, supply chain shortages and continued sector strength, I think AMPY is going to join that list of Oil and Coal winners you saw earlier.
Have a great week!
Editor-in-Chief, True Market Insiders