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Trading opportunities including fundamentals, technical analysis, and news or event-related items.

United Rentals Vs. Herc Holdings - Battle Of The Rental Companies

United Rentals Vs. Herc Holdings - Battle Of The Rental Companies
Back on March 8, I suggested a pairs trade in two equipment rental stocks: long United Rentals, Inc. (NYSE:URI) and short Herc Holdings (NYSE:HRI). Both companies are in the rental business and have exposure to the Oil and Gas Industry, making the correlation between the two stocks quite high, a desirable property for a pairs trade. The rationale for this trade was quite simple: HRI is still coming to grips with being a standalone company. Listed in last year's Q4 report were some of the issues impacting HRI's results:

Additional headcount, primarily in operations and sales;
Increase in interest expense related to debt as a standalone company;
Lower activity in upstream oil and gas markets;
Negative currency impacts;
Ramp up of new locations and the addition of new fleet categories; and
Spin-off costs related primarily to higher IT and professional expenses.
URI, on the other hand, is the largest equipment rental company and is consistently profitable, with plenty of opportunity to expand in a fragmented U.S. market.

Trade Performance to Date

For most of last 2 ½ months since the trade was suggested, the position was underwater, with the stock price for HRI outperforming that of URI. But the tides have now turned, and since the most recent quarterly reports were issued for the two companies, URI has made up lost ground and then some.

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by Steve Auger


Transocean - Slick Investment Or Oil Slick?

Is Transocean Ltd. (NYSE:RIG) a 'slick investment' or an 'oil slick'? I must admit, I have been struggling with this question for some time. But after a lot of soul searching, I'm declaring the stock a slick investment for a number of reasons that I will get into shortly.

This is a difficult article for me to write, because RIG is one of those companies that amplifies the psychology of trading. My emotions tell me to play the trend and short, short, short, ... But my brain is telling me the opposite, to 'stick with the game plan'. When I wrote my March article on RIG, I stated 'Investors should avoid RIG until the stock price drops below $12'. My thought was to get in at a lower price. Well, RIG has been below $12 for some time now and it is now time to put on the blinders and go for it. Investments always come with risks, the bigger the risk, the bigger the payoff. So going long on RIG should result in a pretty good payoff, right?

Technicals

RIG reached an intraday high of $16.16 back on Jan 12, 2017. Since then the stock price has been falling in a steep descending channel with a (hopefully) final exhaustion breakdown of $10.03 on May 4, 2017, before recovering to a recent $11.17.

OK, if you are a Fibonacci lover, then you will recognize this key ratio: $10.03 / $16.16 = 0.62. This is almost bang-on the golden ratio of 0.618, where resistance should be expected and marks a possible turning point.
 

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by Steve Auger