Tuesday, April 29, 2008

SandRidge Energy (SD)

I screened a stock on Monday named SandRidge Energy (SD) in a post titled, My Latest Stock Watchlist and noted that it made just about every screen I ran over the weekend. I looked back at scans from earlier in the year and it did make a few of them but didn’t grab my attention until now.

SD – 44.28, made almost every screen I ran this week (buy near $40)


Stock of the Day

Sandridge Energy Inc. (SD)

Monday’s Closing Price: YGE - $44.38

Sector: Oil & Gas

Industry: Oil and Gas Production

52-week Price: $28.50 - $45.40

SandRidge is an independent natural gas and oil company with its principal focus on exploration, development and production activities. The Company also owns and operates drilling rigs and a related oil field services company with focus on exploration and exploitation of its significant holdings in West Texas. SandRidge operates in four segments: exploration and production, drilling and oil field services, midstream gas services and other.

The stock recently logged a new all-time high on increasing volume as it broke-out above the ideal entry area of $41.15. Unfortunately for me, it broke out during the week of my vacation (and return). I can’t say that I would have bought shares but I am interested now. I understand that crude is selling at all-time highs and some people are calling for a top but I am not about to listen to them. Money is still to be made in this industry. By the way, SandRidge is in the #1 rated industry group as produced by Investor’s Business Daily.

Net income was 137% higher than a year ago (3rd quarter) with revenue increasing by 71% during the same time period. Natural gas and crude-oil production jumped nearly five-fold. Shares closed at $31.20 ahead of the 3rd quarter report; it has since given investors a 40%+ gain in a few months.

SD is starting to outperform a few of the top stocks in the top rated industry group, something I do make note of. For example, SD is up 24% YTD as the industry groups as a whole is up 18% YTD. As you will notice, SD shares company with some very respectable names (stocks).

Sister Stocks (Top Rated Industry by IBD):

Range Resources Corp - RRC

Continental Res Inc. - CLR

Quicksilver Resources - KWK

Bois D'Arc Energy LLC - BDE

Petrohawk Energy Corp - HK

Potential Trade Set-up:

Ideal Entry: $41.15

Risk is set at 1.0% of total portfolio or $1,000 of $100k

Stop Loss is 10% or $37.04 (breathing room to $36 is okay)

Number of Shares: 243

Position Size is $10,000

Risk is $4.12

Target is $55+ (based on future growth)

Reward-to-Risk is 3.36-to-1 with ideal entry; less with current price

Continue reading to see the impressive institutional numbers, general fundamental numbers and basic technical analysis that make this stock stand above other recent IPO’s. Net income, revenue, earnings and industry (global) growth make this an ideal stock for my watchlist. I am looking for young companies with increasing earnings and sales.

Institutional Analysis:

Held By Institutions: 38.07%

Total Held by Institutions: 269

Money Market: 123

Mutual Fund: 143

Other: 3

New Positions: 229

Positions Sold: 8

Shares Held: 64.4M

Shares Held Previous Period: 5.8M

Shares Bought: 59.4M

Shares Sold: 0.77M

Value of Shares Bought: $2.3B

Value of Shares Sold: $29.9M

Top Institutional holders; Shares Held:

Ares Management LLC; 13,333,333

Lone Pine Capital, LLC; 6,557,039

Farallon Capital Management LLC; 5,771,010

Janus Capital Management, LLC; 3,545,082

Janus Contrarian Fund; 2,424,071


Key Fundamental Numbers:

Market Cap.: 6.3B

Outstanding Shares: 142.7M

Float: 102.8M

P/E (TTM): N/A

PEG Ratio: N/A

Total Debt/Total Capital: 32.50%

Quick Ratio: 0.96x

Operating Profit Margin: 27.58%

Gross Profit Margin: 76.01%

Net Profit Margin: 7.37%

1-yr EPS Rate: 118%

1-yr Sales Rate: 72%

5-yr EPS Rate: 91%

5-yr Sales Rate: 63%

EPS Growth (MRQ): 141.96%

Revenue Growth (MRQ): 72.49%

Net Income (millions):

FY 2007: 50

FY 2006: 16

FY 2005: 18

FY 2004: 25

FY 2003: 13

Revenue (millions):

FY 2007: 659

FY 2006: 363

FY 2005: 277

FY 2004: 172

FY 2003: 155


FY 2009: $0.64E

FY 2008: $0.44E

FY 2007: ($0.06) - Estimates were for $0.03

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