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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (24843)	9/19/2006 12:48:47 AM
From: Spekulatius	Read Replies (5) \| Respond to of 78749

Recent buys - mostly energy related PTEN (23.8$) , VLO (50.2$), CNX (30.6$) PTEN, 4$ earnings for a 23$ stock, debt free. PTEN shows up in many of my value screen including the "magic formula screen". I could easily see this company being taken out in a private equity deal. VLO - largest independent refine trading at a PE<7. Lot's of FCF. I do not understand why VLO appears to trade in lockstep with crude since it's the crack spread that matters. I checked yesterday and calculated a 1-2-3 crack spread of 18$/barrel which is a very good margin for refining. I conclude that VLO is mispriced by traders that seem to trade VLO with other energy stocks (basket trading?) CNX owns 80% of CXG, the coal bed methane spinoff. CNX market cap is 5.6B$, with about 560M$ in earnings. CNX 80% ownership in CXG alone is worth 3.8B$x0.8=2.8B$ now we subtract CXG earnings (80% of 140M$=112M$/a); 560M$/a (total) -112M$/a(gas) =448M$/a Net result of stripping out CXG from CNX: Net market cap 5.6B$-2.8B$=2.8B$ with 560M$-112M$=448M$. Now CXG cannot be sold near term for tax reasons and it looks a little expensive with respect to earnings.However i believe that CXG still is not overvalued based on it's reserve, the future production growth of 15% and reserve growth at very low cost (<0.5$/mcfe!). Anyways without the gassy spinoff we have CNS 448M$ in earnings valued at only 2.8B$ for a net PE of 6.25 without CXG. Total energy related portfolio allocation about 15% now, so it's not that i am placing a large macro bet. But in all those cases above i think my math is correct and Mr Market is doing something stupid. We shall see.