Revisiting a Fracking Play with Big Momentum

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

The year of 2016 ended on a negative note as U.S. stock markets pulled back in the final week of the year. The Dow Jones fell 0.77%, the S&P 500 dropped 0.97% and the NASDAQ tumbled 1.43%. The MSCI Emerging Markets Index surprised on the upside by jumping 2.13%.

With the Q4 emerging markets rally a no-show in 2016, I am recommending that you take advantage of this short-term rally and sell your position in the iShares MSCI Emerging Markets ETF (EEM) for a 5% gain.

This week’s new Bull Market Alert recommendation revisits a previous oil and fracking play.

Recall that fracking is the process of extracting oil from the ground by unconventional means.

U.S. Silica Holdings Inc. (SLCA) produces and sells commercial silica — “fracking sand,” in plain English — used by oil frackers to recover oil and natural gas.

SLCA 1-3-17

U.S. Silica Holdings, Inc. (SLCA) vs. the S&P 500 over 12 months

As the chart above confirms, SLCA had a remarkable run in 2016.

Here is why I expect that run to continue into 2017.

First, as a result of the improved efficiency of fracking techniques, the amount of sand used per well has increased by two to three times over the past year. That means that demand for the fracking sand U.S. Silica Holdings provides has exploded, with requirements in 2017 expected to surpass the previous peak in 2014.

Second, President-elect Donald Trump’s pledge to loosen restrictions on oil and gas drilling has lit a fire under the entire sector. This change in prospects is especially significant for fracking sand producers whose business is in the United States and whose share price has been hit hard over the past two-and-a-half years.

Third, U.S. Silica Holding’s stock has terrific momentum and is the top bet on the fracking sector among the more than 40 leading small-cap investment strategies that I track.

So buy U.S. Silica Holdings, Inc. (SLCA) at market today and place your stop at $47.20.

If you want to play the options, I recommend the SLCA March $55 calls (SLCA170317C00055000), which last traded at $5.54 and expire on March 17.

Portfolio Update

Click here to view the Portfolio Update.

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE

previous article

Dividend investing expert Bryan Perry discusses what high-yield investors can expect from the new year.


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Profits Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • Intelligence Report
  • Bullseye Stock Trader

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Technical Traders Alert
  • Success Trading Group

Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor