Out Fox The $treet

Big news lately on the LNG export front. Yesterday Cheniere Energy Partners (CQP) got approval to begin construction on it's export terminal in Louisiana. Today Sempra Energy signed agreements with 2 major Japanese companies to develop and construct a natural gas liquefaction export facility in Louisiana as well. While another major step towards exporting the abundance of cheap natural gas in the US, it will take until 2016 before the facility would commence operations. With these 2 commercial agreements with Mitsubishi Corporation and Mitsui & Co ., the project would already have 66% of production set for 20 years. Now the question is whether the US government will ultimately allow the export of this natural resource. The answer so far is yes, but what happens in 2014 when the future prices for 2015 and beyond start soaring? The plan involves building 3 liquefaction trains with a total export capability of 12 Mtpa of LNG, or approximately 1.7 Bcf per day. Constructi...

Interesting note on Foster Wheeler today. According to Bloomberg , call volume at noon on FWLT hit 10,400 which is nearly 4x normal average. Now the report suggests this has something to do with a contract won in Abu Dhabi. This seems like non-sense as the deal doesn't seem like anything exceptional (FWLT didn't list the value). Mainly though the majority of the calls bought today were for March '11 in the $38-40 range suggesting that some investors expect a significant increase in prices. Though one needs to consider that the average option price of $.25 means the investor isn't heavily invested. High option volumes can be a good indicator of something big in the works or just a huge headfake. Time will tell on this one.

The market continues to prove that it's forward looking. Before the market opened, Foster Wheeler (FWLT) reported a decent revenue and profit miss. So is the stock down 5, 10 or even 20%? Actually NO! FWLT is up over 5% today. Naturally helped by the huge rally in the overall markets today. How could a company that just reported another disappointing quarter have such a bright day? Actually pretty easy. First, they announced a re initiation of the stock buyback program and a Q3 purchase of 4.3M shares for nearly $100M. Combine that with $500M more in the pipeline and only a $3.2B market cap this adds up to nearly 20% of the float. Second, the company announced that they've signed 2 major deals in the first part of Q4 and see a further pick up in orders. For a company like FWLT, orders typically trump current period earnings as proxies for the stock price. Another issue was the recent departure of the CEO. The stock initially sold off following the announcement of his depart...

Coventry Health Care (CVH), Teradyne (TER), Foster Wheeler (FWLT) The market has become increasingly technically driven making investment decisions based on fundamentals virtually worthless. Too many investors feel the fundamentals could collapse with a double dip just as they did in 2008. As I wrote in a previous entry [Coventry Health Ups Guidance - Stock Limps Higher], even a company showing fundamental improvements is ignored by the market. CVH trades at a 7 PE multiple which in normal environments would be 2-3x higher. James Altucher published a piece in the Wall Street Journal highlighting 7 reasons why the SP500 could hit 1,500. Nearly a 40% gain from the current levels. He highlighted several reasons regarding the strength in corporate profits something that is historically important to stock prices. When the market stabilizes, profits will once again become important so its key to understand where the market could go based on current projections. Corporate Profits at Record H...

In the wake of the of the Goldman Sachs (GS) fraud case, Stone Fox capital decided to use the opportunity to unload the remaining shares in the UltraShort Russell (TWM). It just doesn't pay to hold these ultrashort shares and we don't see the fallout from a 2007 fraud case being long lasting. The case may gather steam and cause more damage then I expect, but we'll stay tuned next week. We added back to the Foster Wheeler (FWLT) shares that we sold for the Growth and Hedged Growth Portfolios last month and started a new position for the Opportunistic Portfolio. Technically FWLT is in a position to breakout with the 20ema crossing the 200ema and we like the future prospects for infrastructure growth. Asia and the Middle East (OPEC) should be ramping up now that world growth is flourishing. Best of all, FWLT is still considerably below the $80 high they hit in 2008. On the earnings front, FWLT made $3.73 in 2008 and they likely will retest those levels by 2012. The estimate fo...

Considering that oil has traded in the $80s range for months now, it shouldn't be that surprising that OPEC would revive projects shut down in 2008-2009. Apparently ever project is now moving forward though that wasn't conveyed by Foster Wheeler (FWLT) and other energy engineering firms in their Q4 reports. Maybe its a sign that we'll see some awards in the next 6 months. Today OPEC announced that some 150 projects are now moving forward to increase annual production by 12M barrels by 2030. Of those projects, some 35 were canceled/delayed and have now been restarted (other reports suggested that 135 projects were delayed). Either way the E&C firms should see higher order rates in the near future if true. Another big issue during the crisis was financing and I'd expect with oil maintaining at these levels that will soon disappear as an issue as well. Members of Opec, the oil exporters’ group, have revived the oil projects they put on hold when oil prices collapsed t...

In order to raise some cash for the Growth and Hedged Growth Portfolios we sold roughly 50% of our positions in both Gafisa (GFA) and Foster Wheeler (FWLT). Both stocks have traded weak of late with GFA dropping below its 20 & 50 EMAs and FWLT being unable to get above the 20EMA even with such a strong tape. Long term though we still like the macro situation for both stocks. Short term we let the charts tell us that the action might turn bearish. GFA is doing an offering next week so that explains the weakness on that stock. With FWLT, its difficult to see why it remains so weak. The news seems bullish and it continues to trade at much cheaper levels then a competitor like Jacobs Engineering (JEC). Foster Wheeler ( FWLT ) estimate changed at Barclays. FWLT 2011 EPS estimates introduced at $2.50, 2010 maintained at $2.30. Reiterate Overweight rating and $38 price target.

Or at least thats the word from Dow Jones. Iraq is the process of increasing production of oil to over 6M barrells per day from roughly 1.5M barrells. The complete project is expected to cost over $5B and take several years to complete. This could be one of the mega projects that the FWLT CEO continues to talk about to anybody that will listen. Unfortunately most people in the market have been unwilling to listen to him. Demand for these mega projects that take 3-4 years to complete just isn't eroding. FWLT is a huge buy at these levels and based on the continued strong order flow and backlog. Makes me wonder why the stock even sold off in the beginning. Of DOW JONES NEWSWIRES AMMAN (Dow Jones)--Foster Wheeler Ltd. (FWLT) and two other international firms have won contracts to boost Iraq's export capacity from its southern oil terminals on the Persian Gulf, an Iraqi Oil Industry source in Basra said Thursday. U.S.-based Foster Wheeler was awarded a front end engineering and des...