The Marcellus shale basin was a hotbed of activity earlier in 2008 as natural gas prices soared. While a favorite stomping ground for the likes of Chesapeake Energy (NYSE: CHK), an independent E&P company XTO Energy (NYSE: XTO) thought it best to buy its way in and paid Linn Energy (Nasdaq: LINE) $600 million for some of its acreage.
That was a smart move for Linn, which ultimately sold off three properties for about $1 billion, at what has proved to be the peak period during the oil and gas bubble this summer. That kind of smart management, coupled with hedging maneuvers that locked in top prices for the next few years, means Linn Energy's dividend yield looks secure for at least another couple of years.
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CAPS member GekkoCapital218 finds the price right for Linn, though it's always possible the future can change the situation:
For the short term yield should hold stocks value and even without acquisition based expansion [Linn Energy] should see continued growth of production through redrilling the fields it already owns. Beware situation may change after a couple of years when their mature fields production decays. If acquisition for expansion does not resume in a couple of years dividend will become unsustainable and stock will fall.
What's hot, what's not
Linn Energy is just one of several stocks Google's search activity shows is drawing more interest lately. Below are a few more hot stocks we've found by watching the giant's search trends, which we then pair up with ratings from the Motley Fool CAPS community. Over the first 20 months of tracking the collective intelligence, the data shows that newly minted five-star stocks offer the best opportunities for investors, while the lowest-rated companies fared the worst. A five-star rating is the highest a company can get in CAPS.
By adding in some performance measures for the past year, we can get a handle on how they're expected to do in the future. Here are a few topping the search engine.
|
Stock |
CAPS Rating |
Return on Capital, Last 12 months |
Long-Term Growth Est. |
|---|---|---|---|
|
CA (NYSE: CA) |
** |
11.8% |
11.6% |
|
KeyCorp (NYSE: KEY) |
* |
NA |
4.6% |
|
Linn Energy |
**** |
(1.8%) |
11.2% |
|
Sotheby's (NYSE: BID) |
**** |
13.2% |
17.3% |
|
Sunoco (NYSE: SUN) |
*** |
11.1% |
(17%) |
Sources: Google Finance; CapitalIQ, a division of Standard & Poor's.
Soul searching
Even with auctions down 11% year over year for Sotheby's, it was still able to sell more than $4.8 billion worth of fine and decorative art, albeit most came in the first half of the year. Yet it also points out that perhaps the rich aren't all that different from us after all, whatever Gatsby said. It just takes a bit longer during a recession to hit their pocketbooks.
That's part of the reason CAPS member DFNmoney suggested back in October that the auction house would be a tough play in the current market, but that it was worthy of a bid if and when the economy turned again.
The wealthy will begin throwing money around again eventually. [Sotheby's] will suffer greatly throughout the recession-it's not a stock I'm buying that will be strong while times are bad. But I'm banking on the inevitable eventual rebound. $10 will be a steal in 3+ years.
Copyright © 2008 Universal Press Syndicate.
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