Brace Yourself for Impact!

1
00:00:03.190 –> 00:00:18.190
Andy Millette: So, Dennis, let’s talk about energy and specifically oil over the summer we’ve we’ve talked well. We talked a couple of weeks. Well, a couple months ago about how much we liked energy, how much we liked oil. Specifically, we had our rally here.

2
00:00:18.230 –> 00:00:28.839
Andy Millette: And now we’re right in this range we’re about, let’s say, with crude, I’m looking at a chart at about, I would say, 80 to about 85. It’s a tight range.

3
00:00:28.940 –> 00:00:35.979
Andy Millette: What do you see where we’re at with this current leg here and the economic data that’s coming out?

4
00:00:36.860 –> 00:00:47.570
Dennis Leontyev: Yeah, well, we talked about it starting spring and how we were bullish on oil and energy stocks. And fortunately we were right.

5
00:00:47.620 –> 00:00:55.320
Dennis Leontyev: I was a great rally in the, in the commodity itself, and especially in the energy equities.

6
00:00:55.370 –> 00:01:04.260
Dennis Leontyev: Yeah, you you’re right. It’s about 80 85. It was a good rally good little bit overboard. Nothing’s wrong with that, I think for now?

7
00:01:04.610 –> 00:01:09.010
Dennis Leontyev: As far as commodity is concerned. We’ll be waiting for

8
00:01:09.260 –> 00:01:33.769
Dennis Leontyev: then use from the bricks. And what are they trying to do? As far as the dollar is concerned, and oil, you know, petro dollars, so to speak. I’m expecting it to either stay in the range or continue to rally. I don’t see. I’ll see pull backs as minor pull backs more on it over technical nature.

9
00:01:34.380 –> 00:01:48.370
Dennis Leontyev: So as far as commodity is concerned, I’m I’m still bullish or neutral. Let’s let’s put it this way as as far as indexes and Etfs and individual stocks. I absolutely love them.

10
00:01:48.500 –> 00:02:02.569
Dennis Leontyev: We. We were discussing Xop in particular. when it was at 120. And now it’s 1 50 or there, about. So it’s a great 20% rally.

11
00:02:03.080 –> 00:02:19.259
Dennis Leontyev: And it looks bullish. It’s what’s what’s interesting to note is as we discussed that the equity market is just sold off over 5%. And this is the only sector that was not affected by it whatsoever.

12
00:02:19.390 –> 00:02:41.599
Dennis Leontyev: So it’s still at the highs today challenging the highs, which is a very encouraging signs. And even in face of the overall market weakness, this sector just did not pay attention and continues to do well. It still looks very bullish. It’s not really over bought much. So II do. Pull backs is minor

13
00:02:41.600 –> 00:03:04.379
Dennis Leontyev: minor occurrence. It looks, looks really good. We’ll see what the bricks would be talking about this week. and then Jackson Hole what they gonna talk about, and I think I don’t see any negative coming out of it as far as oil. Crude oil is concerned, I think. No matter how you look at it, it looks bullish.

14
00:03:04.800 –> 00:03:08.810
Andy Millette: Yeah, let’s work all of that out, because,

15
00:03:09.530 –> 00:03:12.920
Andy Millette: I go back to a thought. I was concerned

16
00:03:14.150 –> 00:03:21.529
Andy Millette: 3 months ago, when we were somewhat negative on equities, but both of us were bullish on oil.

17
00:03:21.750 –> 00:03:28.070
Andy Millette: and I said, Well, what if the broader market sells off and you brought up a chart?

18
00:03:28.140 –> 00:03:32.840
Andy Millette: that should a broader market sell off yet oil rally, and I think this was from a year ago

19
00:03:32.850 –> 00:03:41.600
Andy Millette: or 18 months ago. So I thought that was quite interesting, so great relative strength. And it looks like we’re seeing that again. Now.

20
00:03:41.780 –> 00:03:45.079
Dennis Leontyev: and again, we’re also looks like

21
00:03:45.390 –> 00:03:57.410
Andy Millette: where we talked about previously. The the supply issue is really starting to take over the oil narrative. If you would. People are becoming aware now that none of the traders are investors.

22
00:03:57.470 –> 00:04:03.169
Andy Millette: Becoming aware of the problem, the issue now, consumers are becoming aware of the problem and the issue

23
00:04:03.180 –> 00:04:08.999
Andy Millette: that things are slowing down yet it’s still costing a lot of money to fill up their car.

24
00:04:09.260 –> 00:04:17.669
Andy Millette: So I guess what my, my question and is, is. yeah. Talk about the relative strength

25
00:04:17.800 –> 00:04:21.019
Andy Millette: again. Just work that out a little bit like

26
00:04:21.100 –> 00:04:38.070
Andy Millette: it’s not really surprising to us. But yet it is somewhat surprising in the best sense that you’ve had a hard. hard downtime in some hard economic indicators or economic data that’s happened in the broader economy. Yet oil oil has not only stood firm, its

27
00:04:38.900 –> 00:04:46.430
Andy Millette: it’s just shrugged all of this off. So what are your thoughts on that? Precisely as you mentioned. We talked about

28
00:04:46.440 –> 00:04:52.810
Dennis Leontyev: the chart it was about 18 months ago when the bear market started in the broad equities.

29
00:04:52.900 –> 00:05:10.020
Dennis Leontyev: And you know, Smp went down to 27% somewhere in from January of last year to October of last year and looked at we we both looked at the chart of not just crude oil, but crude oil. Equity is the part of S and P.

30
00:05:10.040 –> 00:05:27.740
Dennis Leontyev: They went straight out. They were up like 40% forgot how much. So the only sector that did well. And I think it’s repeating itself over the last 3 weeks that the the market went down. Okay, only 5%,

31
00:05:28.110 –> 00:05:42.040
Dennis Leontyev: but actually an exopli and the individual that which is on the Energy Act, which is doing great, that today the challenge of their highs highs on this particular run

32
00:05:42.200 –> 00:05:50.439
Dennis Leontyev: they’ve had, so the relative strength will produce more strength. This is this is wonderful. Another thing is

33
00:05:50.510 –> 00:05:53.569
Dennis Leontyev: supply and demand.

34
00:05:53.650 –> 00:05:58.389
Dennis Leontyev: And this is few months ago.

35
00:05:58.810 –> 00:06:26.809
Dennis Leontyev: it was just more of a trading markets for oil. Now, investors longer term investors realize that. Yeah, this actually happening. I mean, the the demand is there that there’s not enough supply, and so on, and so forth. So he has to. It has to go up. And it’s it’s going out. The Commodity and the Energy Act, which is these 2 developments are very bullish for crude oil and crude oil stocks. Nothing is changing, and

36
00:06:27.170 –> 00:06:31.189
Dennis Leontyev: it’s it. It looks good. I don’t see

37
00:06:31.370 –> 00:06:47.569
Dennis Leontyev: I don’t see anything if anything bearish, and if breaks come out with some news, or some ideas on how to, you know. Avoid the dollar, you know, and Petro dollar, and so on. Then the oil will rally in the act, which is, which is something, will go straight up.

38
00:06:47.610 –> 00:07:04.240
Andy Millette: Well, let’s talk a little bit about that. The politics of it. The pricks getting together and wanting to go away from the Us dollar to really to buy commodities. Specifically, oil. Yeah. Work that out. In what do you see? Happening both short term and longer term

39
00:07:04.440 –> 00:07:10.079
Dennis Leontyev: are short term. I don’t think they’re going to change things dramatically, but they might

40
00:07:10.090 –> 00:07:14.450
introduce certain ideas like trading

41
00:07:14.720 –> 00:07:16.920
Dennis Leontyev: oil instead of

42
00:07:17.160 –> 00:07:23.040
Dennis Leontyev: dollars used gold, for example. That’s kind of ideas that

43
00:07:23.260 –> 00:07:29.409
Dennis Leontyev: starting to surface out there, and that would change things quite a bit. It would be.

44
00:07:29.510 –> 00:07:32.609
Dennis Leontyev: It might be very negative for the dollar.

45
00:07:32.830 –> 00:07:50.900
Dennis Leontyev: and therefore it it will be really bullish for both gold and and and energy and crude oil. I’m not sure if it’s going to be that drastic over news. Right? Say that, said, forget the dollar. II doubt that.

46
00:07:51.150 –> 00:07:58.069
Dennis Leontyev: But if more and more people realize that that’s the direction that the bricks and other countries are going.

47
00:07:58.240 –> 00:08:11.159
Dennis Leontyev: Then just the thought of it occurring would create demand for good oil futures and and the energy equities just just the thought of it.

48
00:08:11.270 –> 00:08:24.620
Dennis Leontyev: So that’s that’s quite important. And as you you know, you read the inventories that come out once a week. It’s still still very bullish. It’s just

49
00:08:24.780 –> 00:08:28.530
Dennis Leontyev: one of the most bullish reports I’ve seen in a long, long time.

50
00:08:28.540 –> 00:08:43.369
Andy Millette: Yeah, I’m Rita. I watch those weekly they come out Tuesday Tuesday afternoon after the markets and Wednesday, and if you have a negative you might have one out of 2 or 3.

51
00:08:43.799 –> 00:08:57.130
Andy Millette: Maybe maybe you’ll have a Bullish report, and then you’ll have a negative or an but then it goes right back to a Bullish report, meaning they’ll see a drawdown, a significant drawdown, a struggle drawdown. Yeah, then you might see a buildup.

52
00:08:57.800 –> 00:09:02.380
Andy Millette: But then the next week you have another significant drawdown. So

53
00:09:02.410 –> 00:09:07.650
Andy Millette: And I’ve never seen those numbers before, and like you, I’ve been doing this for

54
00:09:07.950 –> 00:09:22.059
Andy Millette: a long time, so I just these are very, very bullish inventory reports. Yeah, yeah, I’d I’d say that there is a good chance that crude oil would over pull back and zigzagging. I think it can. I can get to 100

55
00:09:22.170 –> 00:09:26.029
Dennis Leontyev: so it can get to 100 within next several months.

56
00:09:26.350 –> 00:09:40.670
Dennis Leontyev: Yeah, II would agree with you. No, it’s and I think the worst case scenario is which is going to stay in this little range around 80 something like that. So which is fine by me. But I think even if we stay there

57
00:09:40.700 –> 00:09:51.490
Dennis Leontyev: the energy Ets and individual stocks will continue to to go up because they still cheap even after this 20% rally or so.

58
00:09:51.520 –> 00:09:56.690
Dennis Leontyev: they still cheat and just general evaluations.

59
00:09:56.740 –> 00:10:18.490
Dennis Leontyev: especially when the we just talked about the overall market is a little bit concerning again and when it becomes concerning people start looking for value. And that’s where the value is. So it was the whole about AI, which is justifiable. But it got over, bought, overdone

60
00:10:18.500 –> 00:10:23.270
Dennis Leontyev: over everything. And and the

61
00:10:23.400 –> 00:10:28.050
Dennis Leontyev: yeah chase. Yeah.

62
00:10:28.120 –> 00:10:37.110
Dennis Leontyev: so and it did run. I think it has run its course for now and and with interest rates where they are at the moment

63
00:10:37.160 –> 00:10:43.070
Dennis Leontyev: growth is out of favor, and people are starting to look for value. And that’s where value is

64
00:10:43.270 –> 00:10:57.420
Dennis Leontyev: what specifically.

65
00:10:57.480 –> 00:11:19.110
Dennis Leontyev: you know, larger caps and the well known X and mobile of this world, and so on. But every now and again I’m looking at some little bit of smaller caps or net cap stocks and see how they doing how they value. And what’s on my radar screen and something that I bought lately. It’s called Murphy, U.S.A.

66
00:11:19.420 –> 00:11:34.370
Dennis Leontyev: The ticket symbol is M. U.S.A. Musa, I guess. So that’s an interesting company. If you look at the chart, I’ll I’ll share the chart with you. Let me see if I can do it. I’m gonna share screen.

67
00:11:34.710 –> 00:11:39.969
Dennis Leontyev: Well, let me see if it if you can see it.

68
00:11:41.530 –> 00:11:55.090
Dennis Leontyev: Yep, I got it. Okay. So this is the charted a bunch of squiggly lines. So the chart is on top. If you can see it straight in, it’s 31215, basically. And the highs

69
00:11:55.130 –> 00:12:01.620
Dennis Leontyev: challenging the size of last October. It’s not even really over bought and

70
00:12:02.150 –> 00:12:09.309
Dennis Leontyev: be able to chart at the bottom. It’s the blue line that’s implied volatility. So it’s a steady start

71
00:12:09.360 –> 00:12:16.680
Dennis Leontyev: on an annual basis. It’s growing about 26% or so, which is pretty

72
00:12:16.930 –> 00:12:29.249
Dennis Leontyev: pretty hefty, and it is correlated to our oil, but it’s not as correlated. So, in other words, a little bit about the company. I don’t know if you’ve heard of it or not. It’s an independent retailer.

73
00:12:29.540 –> 00:12:37.100
Dennis Leontyev: Fuel and merchandise. There, I think they are out of Arizona. They’re operating

74
00:12:37.200 –> 00:12:46.359
Dennis Leontyev: 1,700 retail stations. Most of them are near Walmart. and they’re all over the place

75
00:12:46.470 –> 00:12:58.880
Dennis Leontyev: they outperforming everything. They’re outperforming the oil indexes. They’re outperforming the commodity. As I said, they’re related to crude oil, but not not not 100.

76
00:12:59.110 –> 00:13:00.470
Dennis Leontyev: Alright. So

77
00:13:00.530 –> 00:13:11.490
Dennis Leontyev: the day trading at a PE forward fee of about 14.6 currently is, I think 11 stop sharing this

78
00:13:11.730 –> 00:13:14.449
Dennis Leontyev: hold on a second. So they have a dividend.

79
00:13:14.780 –> 00:13:32.499
Dennis Leontyev: Yeah. But the dividend is not huge. I think it’s about 1% or so, but it’s still still fine. So it it’s there optionable stock. Yes, it is. And actually, when I show the applied volatility on the bottom. Yeah, this implied volatility is very low.

80
00:13:32.550 –> 00:13:40.439
So, for example, I’m looking forward to the next 4 months or so, right? It’s trading at, I think, 312.

81
00:13:40.520 –> 00:13:56.770
Dennis Leontyev: So at the money call which is, let’s say, 310 you can buy it for about 23 bucks. Which sounds expensive, but it’s not you can do. Well, I’m an options, Guy, you know. So I’m looking at something interesting, like a vertical spread.

82
00:13:56.900 –> 00:14:14.499
Dennis Leontyev: So if I buy 310 call of December and sell 350, you can. So this is a $40 spread you can buy it for about 15 bucks or so, something like that. So by 15 to make 25

83
00:14:14.610 –> 00:14:33.979
Dennis Leontyev: and for it for that to go to 3 50 is nothing, really, because it’s growing like crazy. There are no problems. There’s no debt whatsoever. The projections of analysts are much higher prices, Zach says. It’s number one ranked, which is a good sign as well.

84
00:14:34.040 –> 00:14:35.340
Dennis Leontyev: and

85
00:14:35.410 –> 00:14:46.140
Dennis Leontyev: it’s valued. It’s valued on average less than most of other energy stocks. So this is just one of the ideas.

86
00:14:46.200 –> 00:15:08.910
Dennis Leontyev: And I just showed this chart. If you look at the longer term chart, maybe like 4 or 5 years, it’s just a steady up. steady up. So when oil corrected in the beginning of this year, it corrected as well. But this is normal corrections. They see no problems with the company. So sometimes you find something like that and say, Why not either do the options strategy or just buy it out right?

87
00:15:09.240 –> 00:15:22.030
Dennis Leontyev: I think this is, this is a lot of the examples. And there’s several of them. But tonight, today, I wanted to present one of them. Yeah, no, that’s a good idea. I think a great way to play this to

88
00:15:22.920 –> 00:15:27.050
Andy Millette: would be to sell a put on it if you would.

89
00:15:27.220 –> 00:15:34.520
Andy Millette: and then capture that premium there cause. Those are somewhat juicy, and then hopefully, they would come back down to you if you would.

90
00:15:34.590 –> 00:15:46.749
Andy Millette: You just keep the premium, and then what you can do to. If you wanna own just the stock, you get a hundred shares or 200 300 shares, whatever that is, and then immediately sell the calls. Probably

91
00:15:46.790 –> 00:15:55.450
Andy Millette: I’m assuming there’s a 3, 20 strike. Yeah, yeah, the 2 strikes every every 10 bucks. So you can. You can do that’s looking bullish.

92
00:15:55.820 –> 00:16:07.449
Dennis Leontyev: So either buy it out right. Sell a port, for example, who can sell 300, for they don’t have the pricing in in front of me, but I would assume it’s trading about 1617,

93
00:16:07.470 –> 00:16:34.850
Dennis Leontyev: maybe a little lower, maybe 1514 so if you sell it, and if it goes down fine. You own the stock at 300. That’s wonderful. I would like to only 300 if not, and just you collect that, whatever whatever it is. And I’ve been doing this for years, actually, just for our listeners. This is exactly what I’ll do is I’ll just sell some naked puts. But I just I have to. My rule is that I have to love the

94
00:16:35.320 –> 00:16:39.119
Andy Millette: love the the company, and really want to own it at that price.

95
00:16:39.200 –> 00:17:08.090
Andy Millette: But why not? Why not get paid to have some? The market pay me to own it, and then what I’ll do is I’ll just make a determination not immediately, but make a determination. What call I’m going to sell in the future. And so I’ll collect that premium. So yeah, if you sell a port. It’s a it’s a horrible idea to do it if you don’t like the company. Yeah, but if you like the company which I do I’ll

96
00:17:08.336 –> 00:17:09.320
do that all day. Yeah,

97
00:17:09.592 –> 00:17:22.389
Dennis Leontyev: I’ll do it all day. So it’s it’s fine. If it corrects and goes below 300, just give it to me at 300. If not, I’ll collect that premium which represents something like 5% or so. II if you sell a put.

98
00:17:22.450 –> 00:17:39.019
Dennis Leontyev: maybe don’t go to December. Go September, October. Something like that. Yeah, closer in in the in the year. Definitely.

99
00:17:39.260 –> 00:17:42.579
Andy Millette: oil as we’re heading into the the third.

100
00:17:42.590 –> 00:17:46.209
Andy Millette: as were in in the third quarter and heading into the fourth quarter.

101
00:17:46.340 –> 00:18:06.249
Dennis Leontyev: Let’s let’s stay Bullish. I don’t think I don’t see any anything bearish seriously. Love the sector for now. What’s crazy about it, too, is the value still there? We’ve been saying this for a few months. How much we liked oil, and that was just added the extreme lows. And now

102
00:18:06.320 –> 00:18:15.819
Dennis Leontyev: you mentioned this, the value play, and I think that’s exactly what this is. In fact, if you’re late, a little bit late. You’re not late. It’s just you understood exactly.

103
00:18:15.830 –> 00:18:18.889
Andy Millette: You didn’t by the bottom, which is actually a good thing.

104
00:18:19.020 –> 00:18:43.629
Dennis Leontyev: Cause that can be risky. But that being said, you know you’re just not late. You are doing a war on Buffett here and buy in value. We were talking about it. A few months ago the valuations were ridiculously low. It’s just down to the floor, so they still cheat still cheap. So we rally another 20

105
00:18:43.670 –> 00:18:48.660
Dennis Leontyev: and energy equities. That would be fair value.

106
00:18:48.680 –> 00:19:22.899
Dennis Leontyev: Right? So we’re still on the value you’re not chasing here. You’re not chasing anything. Yeah. So if you miss the bottom. You’re no problem still still low. Still, I’m a I’m still a buyer. So, in fact, we would teach this previously. It’s like you can wait. Just wait wait for the to get confirmation and a breakout. And that’s but really what we’re at right now, you know, we just got a confirmation of that rally of about 50 of about 20% on those indexes. That’s the confirmation that everything is fine, that the world is not crazy. And people actually realize what value is.

107
00:19:23.020 –> 00:19:33.609
Andy Millette: Yeah, this is an opportunity. Alright. Well, thank you, Dennis, for your time. And we’ll see again. Always a pleasure, Andy.