Myth465

Lol, I just had to post this. http://adventuresincapitalism.com/post.aspx?id=c7d009ac-2654-4751-af96-2962a32041c9 Kuppy always has interesting takes on things.

Excellent update on the Supertanker crude markets - OSG has always been great for getting an update on the market. http://viavid.net/player/dcem.aspx?sid=00007E88

Packer with you on the board its hard to hold cash. Why do you think all of these companies are so cheap. Do you think its a sector thing, or individual securities. I researched GCA when they orginally sold off and decided to punt due to them losing the big contract. 1. What happened to Reading International and what made you focus on CKEC instead. It seems to me that realty and movie theaters would be good businesses so why are these so cheap. I kind of like the land holdings for Reading given that Aussie realty prices are crazy at the moment. 2. GRVY - whats the back story. They seem extremely cheap and may have some good prospects with the games they develop. 3. How much do you put in each one of these positions. Are they all basically 2-4% positions unless one really leaps out at you? -------------------- In terms of Pharma I understand the big reason for the sector being undervalued, but dont think I can ever understand the companies in general.

http://www.bloomberg.com/news/2011-01-05/supertanker-surplus-increases-cutting-the-chance-of-a-rally-in-hire-rate.html http://www.bloomberg.com/news/2011-01-04/supertanker-rents-may-stagnate-after-worst-december-in-a-decade.html Looks like right after Q4 releases may be the right time to buy. Anyone have any takes on supply and demand. Aside from scrapping older ships due to lower than break-even rates what can bring things into balance. If rates fall off a clip, ships are scrapped, rates stabilize, and the economy recovers causing a shortage - we could eventually have a nice run. The last bit of the pie is getting the timing correct, any advice on that?

I really hope we are range bound. I would love a 10 year range bound market while I am building capital, and then a 10 - 20 year bull market starting in 2020. One can only hope.

So far we have Insurance Stocks - Many trading at less than book. Earnings pressure due to a soft market and low interest rates. Death by a thousand cuts. Many surviving on reserve releases, and one big cat could bring on a hard market. Can probably buy after the market hardens. Good time to pick your jockeys. Parker Stocks - A catch all for all those cheap media and entertainment stocks. Perhaps cheap due to neglect. Supertankers - Crude shippers, way too many ships have caused rates to fall to below or at break even. Slow steaming, scrapping, and double hull requirements will eventually bring it back into line. Hard to time, those who have tried were killed in 2009 and 2010. Grocery Stocks - Still working on this one. ---------- With resources and the market in general rallying I thought it would be useful to begin the search for the next big sectors to recover. What I hope this thread does is provide a discussion on sectors which have not yet turned, and may be close to turning. After the sectors are identified I then hope we can begin discussing individual securities. One sector I looked at for about 4 months last year was Shipping. SSW has rebound quite nicely, but all of the crude shippers are very depressed. Today I noticed they were all at lows and have begun kicking the tires again. I cant predict when this sector will turn but know rates have been in the dumps for 2-3 years. Here are some good interviews / articles I found when researching the sector. A value investors take - http://www.bloomberg.com/video/65426348/ He comments on TNP. An interesting read - http://seekingalpha.com/article/201632-high-conviction-tide-is-rising-for-the-global-shipping-sector?source=qp_investment_views An interesting read - http://seekingalpha.com/article/243063-the-start-of-a-bull-market-in-tanker-rates?source=qp_article Here is the other side - http://www.bloomberg.com/news/2010-12-16/supertankers-head-for-worst-december-in-nine-years-as-ship-glut-cuts-rates.html ----- Individual Stocks. I have owned OSG and made and last money on it. I made money on OSP, and lost a tiny bit on OSG. I like Management but am annoyed that they were buying back shares in the 70s, 80s, and 90s due to a discount vs scrap value. That didnt work out so well. They had a monster 20% FCF yield when rates were at there highest. They have spent most of the last few years repairing the balance sheet and getting liquitity. FRO - Everyone knows the Monish story with them. I dont like Management for some reason (not sure why), but he is a shipping giant and throws his weight around. Known for monster dividends and bullying other shippers. NAT - Everyone likes these guys. They dont do debt and sell shares to buy ships. I dont think its that great of a stetegy. TNP - My favorite of the bunch. I really like Management and they seem very conservative. The ships are also of a higher quality generally. I watched for 4 months but never pulled the trigger. Couldnt figure out when or why rates would turn. With that said I may buy FRO or OSG due to the leaps on these being very inexpensive. I can get 2013s for nothing on FRO due to the dividend. If I buy shares it will likely be TNP. The stocks will move up with rates moving up. Just need to figure out what gets rates up. Its not the price of crude, but the distance of transport routes and things such as that. I was never able to get a good handle on it. They definitely over built and over ordered ships leading up to 2008, but something has to eventually bring supply and demand in line. Its time to listen to a few conference calls to get some additional color. Thoughts on Shipping and other sector suggestions.

I didnt realize there were literally a dozen ghost cities. I thought there was 1 maybe 2. Interesting. In a global world their is no way they can keep 1.3 billion people under their thumb indefinitely.

The vacancies dont bother me because they have done a great job of re-leasing properties. The rates havent been great on older properties, but I believe with these new properties the basis is so low, its tough to lose money.

The Paulson deal looks very interesting. The other deal is more of the same.

As am I, whats interesting to me is what ever causes a hard market will likely knock down the price of FFH (I am guessing what ever destroys the excess capital in the industry will cause insurers to drop). Its a nice hand, and I look forward to playing it.

Yep we just need an enterprising investor to update it :D

Excellent Interview / Debate Robert Shiller And Jeremy Siegel Debate On Economy In 2011 http://www.gurufocus.com/news.php?id=118925 Shiller is on point for the medium and long term. I actually agree with Siegel in the short term, its hard to bet against an election year.

AAPL seems cheap to me, at the least fairly priced.

A friend and I were talking about this at work. No way Facebook is worth $50 billion. I think if they try to monetize it in the wrong way it will call come crashing down.

Yes you can buy the pink sheet shares. I own FRFHF, in my Wells Fargo account.

You seem like a man who tap dances to work. I hope to say the same about myself fairly soon.

Where is that google docs spreadsheet with all FFH positions on it when you need it.

I will answer these as best I can but these are pretty technical. 1. I know as much about well declines as you :). Fracked wells produce at high rates then decline rapidly - think 50%, 25%, 20%, 15%, 10%, 5% and so on (I made these numbers up but something like that, its an exponential decline which looks like a bell curve). Regular wells produce at decent rates, but still feature declines (though at lower rates). I owned MLPs and they focus on mature wells. A well decline rate (either fracked or regular) declines overtime as the well matures. Probably has to do with pressure, as pressure declines so does production levels. At some point you get a well which produces (relative to initial production) very little but declines at 3%. I think Frack wells will produce for a long time, once all of the declines happen but am not sure. Also you may have to resort to secondary and tertiary recovery methods, but I believe you can have long term production from these wells. These are great assets inmo because you dont have to pump so much into drilling to keep production flat. Its why MLPs focused on them. I like to know where the company is in terms of production. New wells, Medium, or Mature. After that I am good to go. I know CHK and SD have to pump a decent amount of capital into new wells to maintain production. So whatever cash they throw of is not truly free. Something like BBEP doesnt have to because they have more mature wells. Knowing what type of player I am dealing with helps when looking at Maintenance capex. I dont get too deep though, pretty much stay high level here and have picked up what I know from owning different players over the last 3-4 years. Honestly this stuff is what Tom Ward is paid for (and man is he well paid). I keep up with the basics, and let them worry about this. http://www.theoildrum.com/node/5868 2. I owned REN options. I sold them and missed out on 50% - 100% gains. They focused on CO2 EOR. I think its quite economic if one can get access to cheap CO2. http://www.resolutenaturalresources.com/downloads/ResoluteInv%201%204%2011%20Final.pdf I dont worry about which method has more potential. At the end of the day I wont to know if you have the assets, and do you have a way to turn them into cash flow. REN had a good idea. I just thought CEN, SD, ATPG would work out better. I was right. But Cheap Warrants are Cheap Warrants and they would have delivered a great return. REN has cheap CO2, I like the Plant deal for SD, not sure how it works out for OXY but it is probably cost effective. Hopefully it works out for them, though I havent really looked into them at all. 3. I think its over the life of the well. I dont really pay much attention to the ROR. I think its a flawed calculation, but it works surprisingly well in Oil and Gas. What I am concerned with is payback. If the well pays for itself in the first year I am happy. Even if decline rates are 50%, I get half that production for free, I have already gotten my capital back. Thats how I look at it. At some point you will have a bunch of mature wells, with low decline rates for free / zero basis. If you think oil prices are going higher then thats even better. SD is an interesting company. Its similar to XEC, all cash flow and debt is reinvested in drilling. Its the first investment I have made where cash flow kinda sucks and you are basically betting on increased drilling success and eventually oil and gas prices. CEN is the type of oil and gas play I have typically invested in. It was trading at 2x CF and had decent production coming online. Typically oil and gas stocks trade at 4-5 CF. ------ I stay big picture. Cash Flow, Assets, and future prospects for both. Focus on cash flow first, near term production and prospects next, thoughts on the commodity, and finally reserves / assets. - Very similar to Eric Nuttall who has a series of interviews on BNN ( See Petro Bakken thread). Most other details I learn as I go. Alot of quarterly calls and investor presentations primarily on the companies I own or follow. Currently I am getting a first rate lesson from Tom Ward in resource conversion. ATPs management is giving me a first rate lesson on deep water drilling, safe operations, and effective lobbying.

Well hopefully it gets picked up in the stock price.

You cant argue with science and thats science. The issue is cars and planes dont run on nat gas and the infrastructure for both are no where near the same. Nat gas isnt even trade-able on the world stage (outside of LNG). The energy equivalent is 6 to 1 but I dont think the value will ever hit that unless you make nat gas and oil interchangeable. That will require massive infrastructure investments. ---- Also dont get me wrong someone will make a killing on gas at some point, just like someone made a killing on uranium, or rare earths. They will simply be much smarter or luckier then me LOL. Its in my too hard pile, but that has more to do with me than gas.

SD.

Parsad I dont know how you find the time. Everyone thinks im the most efficient person they know, but you remind me of that army commercial. "We do more before 9AM than most people do all day." You definitely do more then me. I am a happy man if I can sleep till 8 AM.

I think its a valid point, but the world is awash in gas. Shale is popping up in several places, and between the US and Canada North America has too much gas in the ground. People can play the game hoping the stuff being produced runs out due to declines, but I dont like that game. I dont see discipline among producers, and alot of the oil plays produce some residual gas. I also dont see gas usage expanding anytime soon due to infrastructure issues. Commodities are already really crappy businesses. I dont want to buy ones that I am personally bearish on, which appear to be oversupplied. Its below the cost of production, but some of the producers dont seem to care. Everyone is hoping someone else stops drilling. Hell half the producers produce oil as well and can afford a loss on gas. They are starting to respond now, but I think they will come back in full force with any sign of a recover. Im a peak cheap oil guy. I would rather own something that is in high demand, has no reasonable substitutes, is traded world wide, and is running out (at least the easy to find cheap stuff). I buy based on $65 - $75 oil and dont have to make any major assumptions on the price movements. Its going higher due to supply and demand, world economic recovery / growth, 2.3 billion people in the third world clammering for a second world / first world lifestyle, and inflation / QE2. If its cheap on $70 oil, and oil is going up then I just buy and wait. SD and ATPG would mint money on $70 oil, $90 - $100 oil is just icing. Gas is in the too hard pile, for me. There will be a spike, I will make money because SD and ATPG will hedge the hell out of gas. Aside from that I am fine. Im not going to buy a company that will be dead in the water should gas prices not move back up soon (Compton or so). My friend is contarian. He invested in Circuit City and is still doubling down on Irish Banks. Sometimes when there is smoke, something is on fire. Is it a paradigm shift, or a just part of the cycle. I dont know and wont find out with my capital. Also we just had the worst winter possible in terms of snow storms. Gas is still under $5. 2008, 2009, 2010 were some of the hottest years ever recorded. Mother nature is doing her part, we just have too much gas.

Welcome Charlie. Here are my thoughts - http://cornerofberkshireandfairfax.ca/forum/index.php?topic=3338.0 Here are Ken Peaks - http://www.contango.com/investor/events/E_P_101_The%20Short%20Course.ppt If you are short on time, focus on Mr Peaks thoughts. The man knows what he is doing. Feel free to ask any additional questions. ---- Its all about assets and cash flow with E&P companies. You are also basically inmo making a directional bet on the commodity when you invest. ATPG, SD, and CHK are cheap because they have great assets, but dont generate significant cash flow given there leverage. We are all betting that oil prices increase, gas prices rebound, or / and they have hit a turning point where cash flow covers capex and interest charges. Then they can drill and continue to grow production, while servicing debt. Its a tough bet, to make but looks good inmo. Rising prices for me are a bonus, and hedges help with falling prices. The stocks are akin to buying a company in a loss position that is about to start generating massive cash flow. If you are correct you win big. XOM, is akin to buying something at 4x CF and hoping it gets revalued to 5 - 6 or that oil prices continue to raise. You will do well, but inmo wont make any real money. --- Also to be quite Frank. The raise in oil and gas prices scares the hell out of me. Oil is an interesting commodity - when food prices rise people starve, but if oil spikes too much it can kill the economic recover by consuming too much of everyones income (oil is embedded in everything). I also dont like the bullishness on oil. If you do invest I would focus on companies which do just fine at $70 - $80 oil. I would be looking to get out of oil right now or close to $100, but SD and ATPG are doing some very interesting things. With regard to gas, I think value investors love to be contarian, but in my opinion we have a fundamental shift and not so much a typical commodity cycle. Those are my 2 cents, and they could be overvalued.

I dont quite follow your put reference. For me a leap is cheap if the premium is extremely low or there is a known catalyst to send the stock up. I dont believe black scholes pricing is correct so there valuation doesnt matter to me.