The market does look slightly overbought, with very few bargains out there currently. Anything consumer has had a nice run over the past few weeks with the drop in prices at the pump, but the downside outweighs any additional upside here. One of the few areas where valuations are reasonable is energy - any dip in oil to the $55/bbl range may make for a good entry point into some of the big oil names, either short or longer-term, as I believe the days of $40/bbl oil are long gone. One of the best values here is Conoco-Philips (COP).
As a result of the run-up of the past few weeks, I have been moving into cash, selling as new 52-week highs had been established on some of my holdings. Additionally, I have a short on YHOO (a bet on a few things - first, the valuation of YHOO, which has "all that can go right, will" baked in, and second, the market in general being overbought). I need a 5-10% correction before I put any money back to work before the end of the year - until this happens, I will be shorting some of the consumer and tech names that have run up.
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I agree with your view on oils and also agree about COP being best of the bunch. I am interested to hear what your thoughts are on the oil and natural gas drillers? I think they have really been beaten down as well and could be ready to move. My pick of the litter is Patterson Energy (PTEN), the company has a very low multiple, great margins, very little debt and a PEG of .32. They also have been going through a huge stock buy back and consistantly beat earnings. They have moved up about 10% in the past few weeks but I still think they are very undervalued and a great value play. Am I crazy? What are your thoughts?
Mike
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