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

To: Bocor who wrote (48016)	5/17/2012 11:05:15 AM
From: Paul Senior	Respond to of 78704

re HES, "The shares now now trade below book value" Actually, trading below tangible book value of $49/sh, according to this site: advfn.com (Of course tangible bv for oil companies can change depending on several factors, e.g. oil price used in calculation, reserves adjustments (proved, producing, probable), etc. Still... trading below tangible is one indication of possible undervaluation.)

To: Bocor who wrote (48016)	5/19/2012 10:53:15 AM
From: Paul Senior	3 Recommendations Read Replies (3) \| Respond to of 78704

Article in today's Barron's by V. Racanelli on Hess: online.barrons.com Negative aspects about HES include: "On April 25, Hess reported first-quarter net of $509 million, or $1.50 a share, down from $619 million or $1.82—a bit less than expected. (Both periods' results exclude extraordinary items.) Meanwhile, revenue at the mostly oil-producing company—its output is 70% liquids and 30% natural gas—fell 7%, to $9.75 billion. Still, this wasn't what caused investors to dump the stock. In a conference call, Hess reduced its production expectations for its important Bakken fields in North Dakota to less than 60,000 barrels per day oil equivalent (Bpoed) from 60,000 Bpoed. Currently, it averages 47,000 there. In addition, it suggested that it might have to raise 2012 capital expenditures higher than its original $6.8 billion guidance. The market took that badly. Hess stock fell 7% that day and slid as low as $44.10 Wednesday. And analysts have been piling on, with at least six cutting their rating on the stock since mid-April. Longer-term, Hess shares are down almost 50% from highs of 87 in February of last year, wildly underperforming crude oil itself, which is essentially flat over the same stretch. Such a sustained divergence suggests shareholders are unhappy with the company's production disruptions—as in Libya last year—and the its habit lately of missing analysts' expectations." Positives include: "Hess trades at less than seven times consensus analysts' earnings estimates of $6.40 a share this year, not much above its low of 6.4. The shares are also near all-time lows in enterprise value (stock-market capitalization plus net debt) to Ebidta, too. Hess seems like a bank; the stock is trading at just 0.8 times book value. Based on existing assets, production, and proven cash flow, there's long-term value in Hess, says Cameron Clement, a portfolio manager with Cornerstone Investment Partners, which owns a significant stake in the exploration and production outfit. Granted, it's a show-me stock now, but after the steep drop, 'the bar is pretty low.' Hess's balance sheet is strong and, on average, the company has returned 14% on equity over the past decade. As of Dec. 31, it had 621 million barrels of proven oil, condensate, and natural-gas liquids, plus 1.2 trillion Mcf (thousand cubic feet) of natural gas. There are other subtle factors that suggest Hess might be at least bottoming in the mid-40s. Insiders have started to buy significant amounts of stock in the open market. In an April 30 SEC filing, Chairman John Hess, for example, reported purchasing 48,000 shares at $52. What's notable there, says Jonathan Moreland, director of research at insiderinsights.com, is that the executive previously had been a steady seller..."