Buy the Buyout? Sell the Sellout?

John Ransom | March 13, 2014 9:00 AM

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Stock number one: EPL Oil & Gas, Inc

Why EPL Oil & Gas (EPL) Is Soaring Today—Reuters

EPL Oil & Gas(EPL_) was soaring 29.82% to $37.79 at 10:58 a.m. on Wednesday after news broke that Energy XXI(EXXI_) would purchase the company for total consideration of $2.3 billion.

The deal would create the publicly-owned independent oil producer on the Gulf of Mexico shelf, according to the companies' statement. Ben Marchive, Energy XXI Executive Vice President of Exploration and Production, said in a statement that the combined company would own and operate 10 oil fields on the shelf with cumulative production each exceeding 80 million barrels of oil.

Symbol: EPL

Trailing PE: 18; Forward PE: 13

PEG: 2.41

Dividend: NA

Estimate Trend: NA

Ransom Note Trendline: Sell EPL

EPL data by YCharts

Stock number two: Energy XXI

Energy XXI to buy EPL Oil & Gas for $1.5bn—FT.com

John Schiller, chairman and chief executive of Energy XXI, said the deal would extend his company’s potential for “getting more oil out of old oilfields” in the Gulf of Mexico, adding: “We are getting a lot more oil out of the ground than people thought you could 10 years ago”.

The absorption of EPL, he said, would create “the only publicly traded pure play on the Gulf of Mexico shelf, with the highest concentration of large, mature oilfields ever owned by a single shelf operator”.

After it was revealed Tuesday that the Senate Banking Committee had reached a bipartisan agreement to overhaul the housing finance system and wind down Fannie Mae (FNMA) and Freddie Mac (FMCC), shares in both companies plummeted by 30% and 26%, respectively. Even the most commonly traded classes of preferred shares (Fannie's FNMAS and Freddie's FMCKJ) traded down Tuesday and in early trading on Wednesday.

Symbol: FNMA

Trailing PE: NA; Forward PE: 1.57

PEG: .40

Dividend: NA

Estimate Trend: Flat

Ransom Note Trendline: Avoid Fannie Mae and Freddie Mac