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Strategies & Market Trends : Value Investing

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To: Spekulatius who wrote (54795)	1/17/2015 5:36:24 PM
From: Mattyice	Read Replies (1) of 78628

I tend to agree with you on this one, I feel like some value investors are rushing to jump into the energy complex because they have missed such large moves in other areas and get the feeling they are looking at the energy complex thinking it has all the makings of a value opportunity that they are trained to look for- fear, sell off, cheaper, etc.. I think your analysis about the capex environment is spot on. The return rates on a lot of these projects were already pretty marginal at $90 - there was a lot of risk taken on multi year projects just to earn a marginal return. Obviously you can point to some shale outfits and some of these guys are doing it cheaper and are going to keep getting better at producing while lowering the cost. I suppose if you think you have better insight than most on these particular companies then by all means go for it, but i feel like it's going to be a crap shoot and probably a longer drawn out process. If you want to play in the depressed energy complex I would steer towards the nattygas heavy and transport/infrastructure folks. The natgas players have had time to adjust to a landslide in price. The discounts to henry hub in certain basins are going to continue to close (expanding pipeline capacity) while the cost to produce is going to continue to decline. In my opinion that is a relationship that you would want to be on. You can possibly use this sell off to your advantage. Oil dominated producers whether it be the different shale plays or ludicrously expensive offshore projects just seems to risky to justify your hard earned capital going towards it at this juncture. You guys know that I love any sell off as much as the next value guy.. but this is one I am not in a rush to jump into. I am probably wrong, and always assume the case. So just my opinion.

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