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Energy Play: Shift Out of Dividend Payers and Into Higher Beta

Tuesday, 3 Jan 2012 | 1:54 PM ET

On Tuesday the energy trade landed on the radar after crude prices spiked above $102.

Military exercises in the Gulf by Iran and the movement of U.S. naval vessels in the area raised fears of a confrontation between Tehran and Washington that could cut off oil exports from the region.

If you have a short-term time horizon, esteemed commodities trader Mark Fisher suggests keeping a close eye on geo-political developments. “In the short term Iran will make lots of noise and oil will have a bid to it.”

He says as a pro he’ll be watching the spreads in the contracts between the front and back end and whether the oil market is in backwardation or contango. “That will be an early indication of a serious flare up.”

If you have a longer time horizon, the pros largely expect the saber rattling in Iran to settle down. If and when they happens top trader Dan Dicker expects to see another theme emerge - rotation into higher beta.

“I expect to see a shift out of big dividend payers and intobeta. Across commodities high beta names are going up big,” he says.

Optimism Drives Stocks
Stocks rallied Tuesday on growing optimism on the global economy, with Mark Fisher, MBF Index Holdings; Dan Dicker, of Merc Bloc, weighs in on the oil trade, and insight on whether the rally in 2012 soon fizzle, with Andrew Burkly, Brown Brothers Harriman strategist.

“That’s the trend for 2012, he adds, "out of safe dividend stocks and into E&P names such as Anadarko , Apache and Hess . Play those stocks as oil goes higher,” he says.

Trader Joe Terranova agrees with the theme. Additional names in this space that he likes include Suncor and Occidental .

Although trader Mark Fisher doesn’t like to name a lot of his stocks, he did tell us his favorite name in the space was Kinder Morgan. "The pipes the carry nat gas and oil are the way to play it," he says.

And Fisher also said the name he likes least is Petrobras. If you're looking at a pairs trade he suggests any name above against PBR.



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Trader disclosure: On January 3, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova is long (VRTS); Terranova is long (IBM); Terranova is long (LQD); Terranova is long (MUB); Terranova is long (EMC); Terranova is long (CSCO); Terranova is long (AXP); Terranova is long (SBUX); Terranova is long (CSX); Terranova is long (APC); Terranova is long (XOM); Terranova is long (TRLG); Terranova is long (TRLG); Terranova is long (SWN); Terranova is long (V); Terranova is long (SU); Najarian is long (CIGX); Najarian is long (CME); Najarian is long (CBOE); Najarian is long (ANR) call spreads; Najarian is long (AAPL) call spreads; Najarian is long (CNX) call spreads; Najarian is long (CSCO) call spreads; Najarian is long (ACI) call spreads; Najarian is long (GS) call spreads; Najarian is long (RES) call spreads; Najarian is long (DVN) call spreads; Najarian is long (RIMM) call spreads; Najarian is long (MDR) call spreads; Najarian is long (LULU) call spreads

For Brian Kelly o fShelter Harbor Capital
Kelly is long (IWM)

For Mark Fisher of MBF Clearing Corp
* No disclosures

For Dan Dicker of Mercbloc, LLC President
Long Oil futures

For Andrew Burkly of Brown Brothers Harriman
BBH does not act as underwriter, market maker or maintain a proprietary trading book, but it may beneficially own securities covered in this material through various investment funds for which it serves as investment manager and/or sponsor. BBH’s partners and employees may own securities covered in this material and/or may make purchases or sales while this material is in circulation. BBH and its affiliates provide investment banking services, investment management and advisory services, securities brokerage services, and non-securities services. The reader should assume that BBH and its affiliates receive compensation for such services. BBH does not compensate its research professionals based on investment banking transactions. The research professional(s) responsible for preparing this material receive compensation based upon various factors including BBH’s total revenues, a portion of which is generated by investment banking

For Brian Marshall
ISI Group
DISCLOSURE: Neither ISI nor its affiliates beneficially own 1% or more of any class of common equity securities of the subject companies referenced in this Report. No person(s) responsible for preparing this report or a member of his/her household serve as an officer, director or advisory board member of any of the subject companies. Neither ISI nor its affiliates have any investment banking or market making operations. At various times these reports mention clients of ISI from whom ISI has received non-investment banking securities related compensation in the past 12 months.

For Dennis Gartman of The Gartman Letter
Long Canadian dollar, aussie dollar, Long Soybeans
Short Euro, and Japanese Yen

For Rebecca Patterson of JP Morgan Asset Management
* No disclosures



CNBC.com with wires.

  Price   Change %Change
APA
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APC
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HES
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OXY
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PETR'
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SU
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AAPL
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KINDER MORG
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