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1 hour ago, Spekulatius said:

Most E&P / energy companies have disconnected from the weak pricing of WTI recently, which is not something that will continue indefinitely.


Are they?  Oil price was at this level or lower for long periods from 2016 and oil company prices were higher than now.

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40 minutes ago, Sweet said:


Are they?  Oil price was at this level or lower for long periods from 2016 and oil company prices were higher than now.

That's meaningless. Many energy co's destroyed value from 2015-2020.  A lot of them went bankrupt as well, others diluted. If you look at those that did not dilute like XOM, they do indeed trade higher than in 2016.

Edited by Spekulatius
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Starter in C. I don’t have any banking positions and am obviously tempted to buy a basket as I become more familiar with the landscape given the current market conditions and sell off. I do have a fairly high allocation to financials between the alt managers and insurance holdings, so I’m trying to gauge my position sizing accordingly. 

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1 hour ago, Spekulatius said:

That's meaningless. Many energy co's destroyed value from 2015-2020.  A lot of them went bankrupt as well, others diluted. If you look at those that did not dilute like XOM, they do indeed trade higher than in 2016.

 

It's not meaningless.  The disconnect is that the energy sector on any long term measure hasbeen underperforming oil price:

 

  • From 2015 highs:  oil -35%, XOP -65%
  • From 2016: oil +75%, XOP -5%
  • From 2017: oil +29%, XOP -33%
  • From 2018: oil +14%, XOP -22%
  • From 2019: oil +33%, XOP -10%
  • From 2020: oil +24%, XOP +10%

 

Companies did destroy a lot of value and that is certainly part or even most of the reason for the disconnect... but the disconnect is real.

 

But OK, if you believe its pointless to compare with the 2015-2020 period is because of shareholders value destruction, then you should also believe that the material improvement in oil companies balance sheets, dividends, share buybacks etc. should result in energy companies outperforming oil. 

 

And these companies obviously should not have a 1:1 relationship with oil if they are making money and producing value for shareholders.

 

 

 

 

Edited by Sweet
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Added to SU. Starter positions CNQ, JPM, MS, WRB.

- not much has changed with oil from a fundamental perspective. Sentiment stinks. Love one day 10% declines in stocks when it is being driven by sentiment. 

 

Edited by Viking
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Built out a portfolio of Canadian high dividend payers. 5% of my portfolio. Average dividend yield is 5.8%. With interest rates cratering, my guess is dividend paying stocks are positioned very well. Will build this out on stock market declines. 

- Communication: T.TO, BCE

- Banks: RY, BNS, CM, CWB

- Utilities: ENB, TRP

- Life insurer: SLF

Edited by Viking
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17 hours ago, Sweet said:

 

It's not meaningless.  The disconnect is that the energy sector on any long term measure hasbeen underperforming oil price:

 

  • From 2015 highs:  oil -35%, XOP -65%
  • From 2016: oil +75%, XOP -5%
  • From 2017: oil +29%, XOP -33%
  • From 2018: oil +14%, XOP -22%
  • From 2019: oil +33%, XOP -10%
  • From 2020: oil +24%, XOP +10%

 

Companies did destroy a lot of value and that is certainly part or even most of the reason for the disconnect... but the disconnect is real.

 

But OK, if you believe its pointless to compare with the 2015-2020 period is because of shareholders value destruction, then you should also believe that the material improvement in oil companies balance sheets, dividends, share buybacks etc. should result in energy companies outperforming oil. 

 

And these companies obviously should not have a 1:1 relationship with oil if they are making money and producing value for shareholders.

 

 

 

 

XOP is an index where many small E&P from 2016 went bankrupt. XLE is more large cap and higher quality, so there are way less bankruptcies and impairment in XLE. Thats why XLE has outperformed XOP. The stocks that went to zero remain a zero, there is no recovery. The ones that diluted at the bottom get a partial recovery. The companies that did not dilute and made it through are business like CVX or XOM trade at higher prices than in 2016.

 

C53D6886-100F-49E1-B735-E213FEF43516.png

Edited by Spekulatius
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2 hours ago, Spekulatius said:

XOP is an index where many small E&P from 2016 went bankrupt. XLE is more large cap and higher quality, so there are way less bankruptcies and impairment in XLE. Thats why XLE has outperformed XOP. The stocks that went to zero remain a zero, there is no recovery. The ones that diluted at the bottom get a partial recovery. The companies that did not dilute and made it through are business like CVX or XOM trade at higher prices than in 2016.

 

C53D6886-100F-49E1-B735-E213FEF43516.png


Of course.  I’m not referring to the quality difference between XLE and XOP and how that affects how oil companies track oil prices.  
 

Rather the belief that energy companies must move in lock step with oil.  If companies are managed well, 

they should disconnect from oil prices relative to the companies characteristics.

 

I think we are saying the same thing.

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Bought a bit of $FNF this AM. New position. I think refinance activity is going to pick up after the recent treasury declines and title insurers benefit from this.

 

I am not too exited about their annuity business $FG but it is what it is. Maybe I can even get my $JXN back around $30. These stocks really trade all over the place.

Edited by Spekulatius
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