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Will Oil Drag the Market Lower Again?

The market followed oil lower last week as crude inventories exceeded expectations.  Important economic releases this upcoming week include crude inventories on Wednesday (2/10) and retail sales on Friday (2/12).  In this week’s Weekly we review the Blue Harbinger stocks that announced earnings last week (they were better than expected) and the ones that announce this upcoming week.  We also share a top contrarian idea we’ve been working on to profit from “low for longer” oil prices.


Paylocity (PCTY): Our favorite cloud-based payroll-processing / Human Capital Management company announced earnings last week that came in $0.08 better than expected.  Revenues were also higher than expected, and the company significantly raised FY 2016 guidance.  The stock gained 2% for the week while the S&P 500 lost 3%.  We continue to believe this company presents exceptional growth opportunity and upside for investors that are comfortable with its higher volatility (We own Paylocity in our Disciplined Growth strategy).  You can read our most recent updates and thesis on the stock here.

ADP (ADP): If you’re not comfortable with the higher volatility of Paylocity, ADP is another Human Capital Management company (we own ADP in our Income Equity strategy) that offers strong upside with less volatility and a dividend (the dividend yield is currently an impressive and safe 2.61%).  ADP announced earnings last week and beat expectations by 2 cents per share.  You can read our full ADP thesis and updates here. 

EastGroup Properties (EGP): Our one real estate investment trust (REIT) holding announced quarterly Funds from Operations (FFO) last week that were a penny lower than expected, but the company beat on revenue estimates, and guided slightly higher than analyst expectations for FY ’16 FFO.  We believe this is a safe REIT with strong earnings power and growth potential.  Plus, the current 4.68% dividend yield is very attractive for new buyers.  You can view our complete thesis on EGP here.

Disney (DIS): We own Disney is our Income Equity strategy, and it announces earnings this upcoming week.  We believe in this stock’s earnings power, and this week’s announcement will give us more insight into three important Disney revenue sources:  (1) StarWars (we’ll get more info on the revenues related to the movie’s recent release and related sales), (2) ESPN (we’ll get more information on the extent to which the cable TV “cord cutting” trend is continuing), and (3) China Disney World (we’ll learn more about its expected success).  You can read our complete Disney thesis here.


Profiting from Low Oil Prices:  Certain shipping companies actually profit more when oil is lower, and we’ve been researching the industry as we expect oil prices may stay low for longer than many people expect.  Specifically, Tsakos Energy Navigation (TNP), Nordic American Tanker (NAT) and Aegean Marine Petroleum (ANW) are all more profitable as oil prices decline because their large seaborne ships are used to store crude oil.  Demand for these seaborne tankers has been rising dramatically because the crude inventory supply is so high that customers are reverting to the companies for increased storage capacity.  As a result, the rates these companies are charging has increased more than 4x in the last year and a half.  Our Stock of the Week this upcoming week will likely be one of these companies.  Stay tuned for much more detailed information soon.

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