Analysis: APC BP SLB

The U.S. equity markets trended lower on Wednesday on little market-moving news outside of Tuesday's State of the Union Address. The weak session ends the impressive five-day winning streak in the S&P 500. As Jim explained in today's Daily Rundown video (see our Alert here), we are itching to buy stocks for the portfolio, but are looking to put our war-chest of capital to work on more of a broader pullback. The short-term momentum indicators suggest we are in overbought territory, but that does not guarantee anything as the S&P 500 pressed higher in January despite an overbought condition. Either way, we believe our December 2018 portfolio high-grading and our early 2019 cash-raising efforts into strength have put the portfolio in a flexible, but durable position going forward.

In the energy markets today, the price of WTI Crude rose back near $54 after the weekly petroleum statistics from the U.S. Energy Information Administration showed a U.S. commercial crude build that was lighter than expected. In the week ending Feb. 1,2019, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.3 million barrels from the previous week, less than the 2.2-million-barrel analyst expectation. Although this report carries a high degree of variance and can flop to bearish from bullish week to week, today's figure was a slightly bullish reading nonetheless.

The positive action in oil prices did little to support the stock of Anadarko Petroleum Corp. (APC) , which traded lower on the day in reaction to last night's earnings miss (see our analysis here) and this morning's management conference call. We are heavily disappointed with Anadarko's results, and we did lighten up our position earlier in January through our trade Alert here, however, we are averse to selling the stock on this decline. We have kept our Two rating on the stock, but we were encouraged with how management reiterated its 2019 outlook, remained committed to stock repurchases and debt reduction, and generated a solid amount of cash flow. Bad quarter of execution by management, but likely transitory.

As members know, we have not pounded the table on any of our oil positions in the near-term due to our expectation that oil prices will likely remain range-bound (thanks to the insight from industry expert Rusty Braziel we discussed in our Alert here). When we see opportunities to buy for the long-term, we will continue to keep club members in the know. But of our oil names, our preference continues to be in BP p.l.c. (BP) and Schlumberger (SLB) . Although Anadarko has shown that it can be flexible with its capital too, both BP and SLB offer superior dividend yields to that of APC (~5.70% for BP vs. ~4.44% for SLB vs. ~2.62% for APC) and produced stronger results in the fourth quarter.