Are These Energy Stocks in a Bubble?

With oil around $100 per barrel, many small cap energy stocks have seen huge rallies. The energy stocks below have hit new 52 week highs. Investors might want to think seriously about whether these stocks are rising based on solid fundamentals, or if they are showing signs of a speculative, blow off top. When stocks move this far, so quickly, there is a good chance they could run even more (due to momentum) before settling back.

However, I think it is prudent to take at least some profits on these shares after an incredible run. In particular, I am looking at the market caps and the high Relative Strength Index (RSI) levels which can indicate overbought conditions. Stocks with an RSI rating of about 70 can signal that the shares are overbought and due for a pull back. To learn more about RSI, see here.

Also, with some of these shares trading at very high valuations, I would not be surprised to see management announce capital raising share offerings, as AXAS recently has. If there was a time to raise capital, it appears the window is wide open for now.

Kodiak Oil and Gas Corp. (KOG) hit a new 52 week high today at $7.60. The relative strength index is about 78.4.

These shares have risen from a 52 week low of $2.35. The 50 day moving average is $6.35 and the 200 day moving average is $4.31. Yahoo Finance lists the market cap for KOG to be about $1.1 billion. Compared to the market cap, revenues are minimal and insiders have been selling shares (see here).

Samson Oil and Gas Corp. (SSN) hit a new 52 week high today at $3.50. The relative strength index is about 82.82.

These shares have risen from a 52 week low of about $2.35. The 50 day moving average is $2.05 and the 200 day moving average is $1.31. These shares traded for under 50 cents less than one year ago. Yahoo Finance shows a market cap of about $245 million and says the company has only 7 full time employees. I'd think twice about a valuation of nearly a quarter billion dollars for a company that has as many employees as some families have members. Most likely, SSN has more employees since that report, but still, this likely to be a very high market cap per employee ratio. SSN has reported revenues of less than $6 million for the fiscal year ended June 30, 2010. See their annual report here.

Abraxas Petroleum Corporation (AXAS) hit a new 52 week high today at $6.14. The relative strength index is about 78.61.

These shares have risen from a 52 week low of $1.85. The 50 day moving average is $4.61 and the 200 day moving average is $3.40. Yahoo Finance shows a market cap of about $456 million and annual revenues of about $61 million. You can read the latest quarterly report here.

I think it's time to sell while the getting is good. Most likely the easy money has been made for now and at these levels, the statement "buyer beware" seems appropriate.

Data is sourced from Yahoo Finance and company websites. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.