- Page 1/3
- Next Page
COMMENT
Markets. 2011 was extremely difficult for value investors because there was a real tug-of-war between the forces of fear versus fundamental value. As a consequence, fear overtook the value. Fundamentals on the micro side were actually quite good. 70% of companies came out with greater earnings in Q3 than most people predicted. For 2012, he expects the micro earnings to come through. Rates are still low and will be low for possibly another 2 years so cost of capital is fairly low and he expects acquisitions and takeovers making it a better year.
BUY ON WEAKNESS
North Sea drilling. Canadian company, virtually name only. While their NAV is well through $3, they've had a number of delays. Particularly they’re waiting on a ship coming out of Dubai that has to pass through Straits of Hormuz. The longer this takes, they lose $.05 a share of cash flow from the new Athena. On the positive side, they’re producing at the rate of 5000 barrels a day. Athena will get them up to about 10,000. Would buy this one under $2 and sell it close to $2.75-$3.
oil
gas
DON'T BUY
Construction/production business. They were penalized on the fixed rate contract for Firebag 3, which cost them a lot of money. Good management. Recently sold his stocks but owns their debentures. Prefers Flint Energy Services (FES-T). This one trades at 1.4X Book and pays a $.20 dividend and is trying to get back on the green side on their balance sheet, but suspects the easy money has been made.
contractors
COMMENT
Fundamentally very cheap. On the right track. Revenues are probably through $2 billion. Have been remarkably conservative in terms of their outlook. Expecting will declare an initial dividend over the next 6-12 months and would be surprised if they buyback stocks. Trading roughly at BV. Likes this sector.
oil
gas field services
TOP PICK
Profitable. Good management. The average car on the road today is 10.2 years old so there has been a lot of pent-up demand for autos and hopefully with a better economy and better psychology, there will be a lot of positive news for automobile companies. In January 2011 they acquired a German auto parts manufacturer for about $.18 on the dollar. Could see it easily trading in the double digits.
metal fabricators
TOP PICK
Oil services company. Provides services and rental equipment. Good management. Very cheap at slightly above BV. Expect they will earn at least $.50 this year and more next year. With oil at $100, a lot of the service companies will do quite well. Just sold one of their low-margin businesses. Expect their margins to be 25% plus.
oil
gas
TOP PICK
Trading below NAV and tangible Book. Had a lot of problems with 5 government contracts. They have the Exact Earth division where they have the software that goes on a satellite and is able to cross the Earth several times a day, which will be increasing. This division should break even this year.
Telecommunications
