Capital Returns: Investing Through the Capital Cycle - Edward Chancellor

[schin]

1 hour ago, Gamecock-YT said:

 

It's a good question. I think it's allowed me to get more comfortable investing in more commodity-type businesses by understanding where we are in the capital cycle. I guess the big winner using their concept was Scorpio Tankers. It was a losing position for a long time, with even bankruptcy concerns for most of 2018-2019. But the thesis was always that there was an inevitable supply crunch coming down the pike, no ships had been built since the last boom and product tankers have a finite life (~15 years) where most major oil companies won't contract ships older than that due to contamination concerns. Then Russia invades Ukraine and product tanker stocks go up 200-300%. 

 

But I think now I'm using it as a quasi-screening process when I start seeing M&A activity, dividend cuts, bankruptcies it's a clue to start looking into the industry. Likewise when you see capex increases and/or debt increasing it's a sign that it might be time to start taking money off the table. 

 

@Gamecock-YT I like your answers. M&A activity can be gotten from Dealogic.  Where you do get a screen for dividend cuts and bankruptcies?

 

There's a lot of oil mergers lately (OXY being widely discussed). Dividends and bankruptcies don't appear to be an issue. Are there certain industries you are looking into now?

[Gamecock-YT]

2 hours ago, schin said:

 

@Gamecock-YT I like your answers. M&A activity can be gotten from Dealogic.  Where you do get a screen for dividend cuts and bankruptcies?

 

There's a lot of oil mergers lately (OXY being widely discussed). Dividends and bankruptcies don't appear to be an issue. Are there certain industries you are looking into now?

 

Not necessarily screens but you can get a lot of sector information just by reading a lot. Just this week you've seen Glencore and BHP cutting dividends. A lot of nickel mines are looking to shut down, or asking for government intervention, due to a supply glut coming out of Indonesia. So the mining sector seems interesting, maybe still a little early. There's already talk of a copper shortage in the next year or two. 

 

And as you mentioned O&G consolidation in the permian. Is it likely to spread to other areas? You're seeing consolidation even today in Williston basin/Bakken so early returns seem like so. I could see the canadian O&G companies getting in the act as the TMX pipeline becomes operational. 

 

But those are probably the two I'm focused on currently.

[schin]

5 hours ago, Gamecock-YT said:

 

Not necessarily screens but you can get a lot of sector information just by reading a lot. Just this week you've seen Glencore and BHP cutting dividends. A lot of nickel mines are looking to shut down, or asking for government intervention, due to a supply glut coming out of Indonesia. So the mining sector seems interesting, maybe still a little early. There's already talk of a copper shortage in the next year or two. 

 

And as you mentioned O&G consolidation in the permian. Is it likely to spread to other areas? You're seeing consolidation even today in Williston basin/Bakken so early returns seem like so. I could see the canadian O&G companies getting in the act as the TMX pipeline becomes operational. 

 

But those are probably the two I'm focused on currently.

@Gamecock-YT - Fascinating, thanks.  I've been lead to European bank stocks, but I might be a lone wolf there.

Edited February 23 by schin

[hasilp89]

6 hours ago, Gamecock-YT said:

Not necessarily screens but you can get a lot of sector information just by reading a lot.

collect the dots to connect the dots!