Categories: Bull Market Alert HotlinesStock Market News

Revisiting a Fracking Play with Big Momentum

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.

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.

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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.

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Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world. He was the Editor of The Global Guru, a free weekly e-newsletter, and also edited the trading services Momentum Trader Alert, which focused on making short-term profits in the hottest markets in the world, and The Alpha Algorithm, which was designed specifically to deliver big, fast triple-digit winners, month after month. He was also the editor of Smart Money Masters, a monthly service focused on longer term investments recommended by the brightest minds in the business. Mr. Vardy has been a regular commentator on CNN International and the Fox Business Network. He has also published articles in The New Republic, The World and I, and The Baker & McKenzie Legal Review. The Global Guru/Nicholas Vardy has been cited in The Wall Street Journal, Newsweek, Fox Business News, CBS MarketWatch, Yahoo! Finance, and MSN Money Central. Mr. Vardy graduated from Stanford with a B.A. — with honors and distinction — in both Economics and History, and he also earned an M.A in Modern European Intellectual History. After winning a Fulbright Scholarship, he earned a J.D. degree at Harvard Law School where he was an editor of the Harvard International Law Journal. When not uncovering investment opportunities for his subscribers and investors, Mr. Vardy is a keep-fit enthusiast and an avid student of classical music.