As we enter 2016, we expect to see one major overlying theme to characterize the upcoming year: a significant unwinding of the long FANG/short Commodities trade. Expect to see billions in capital reallocate out of fully valued internet names FB, NFLX, AMZN, GOOG, and into undervalued (and heavily shorted) commodity names. We view the Oil Services names (OIH, DO, RIG, SLB, HAL), Steel names (X, NUE, AKS), and Fertilizer names (MOS, POT) as the biggest beneficiaries. Also expect strong performances out of small to midcap defense names on the back of strong geopolitical tension (especially within the middle east), with our favorite names being AVAV and ARTX. While we expect geopolitical tension to produce significant volatility for crude oil in early 2016, we believe Oil will produce a major generational bottom sometime during late Q1 to Q2 2016 in the $25-30 WTIC range (our model shows an exact bottom based on supply/demand equilibrium at $25.86 WTIC). We view this $25-26 level as a very strong buy and the entry point for all major Oil Services names, and moreover this level will mark the starting point of a major prolonged rally to the $60-70 WTIC level by end of 2016. In terms of acquisition plays, we view AMBA, ETSY, AVAV and DECK as names likely to be taken over in 2016. CMRX and BBRY are two other names we expect to perform very well on a percentage basis, with the former expected to move from the $7 level to $16-18, and the later to breakout to about $15-17.
2016 TOP PERFORMERS:
* USO
* OIH
* DO
* RIG
* SLB
* HAL
* BBRY
* AVAV
* ARTX
* X
* AMBA
* ETSY
* MOS
* CMRX
* DECK
2016 WORST PERFORMERS:
* FB
* AMZN
* NFLX
* GOOG
* LNKD
* DIS
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment