Literal Diamonds in the Rough

Shares of Diamond Offshore are popping by more than 9% as I write this on the back of a buyout offer from Noble Energy this morning. Both firms are offshore rig contractors, with NE bigger than DO. 

Interestingly, shares of NE are higher, too, which is not the typical arbitrage play in mergers & acquisitions--The acquiring firm usually gets sold as the acquired pops. However, when both firms rally it can often mean a cheer from markets that extreme value is being unlocked in a lagging sector now undergoing consolation. 

Indeed, many oil-related stocks are dirt cheap on a valuation basis. In addition, they are out of favor as retail and institutional investors alike continue to feel the need to chase up the tech winning monsters to compete. 

So as the headlines understandable gravitate towards NVDA and the FOMC this week, I am getting a vibe that the pain trade may be long oil, short mega cap tech soon enough. 

Elsewhere, natural gas continues to be on a tear since early-May to no fanfare. If the UNG ETF can negotiate the $21 level here I expect more upside surprises in natty this summer.