When it comes to the energy sector, history has a way of repeating itself.  Energy drillers purse debt-fueled growth when times are good and face a debt hangover when energy prices head south. It’s happening again. The energy sector may face roughly $11.6 billion in bond defaults, according to a recent Bloomberg News article. Understandably, that has made many equity investors leery of this slumping sector. #-ad_banner-#But has the commensurate plunge across the oil exploration and production (E&P) sector been overdone? And if so, might it  present a buying opportunity, both for investors and larger players?… Read More

When it comes to the energy sector, history has a way of repeating itself.  Energy drillers purse debt-fueled growth when times are good and face a debt hangover when energy prices head south. It’s happening again. The energy sector may face roughly $11.6 billion in bond defaults, according to a recent Bloomberg News article. Understandably, that has made many equity investors leery of this slumping sector. #-ad_banner-#But has the commensurate plunge across the oil exploration and production (E&P) sector been overdone? And if so, might it  present a buying opportunity, both for investors and larger players? The shale boom led to inflated asset values. Now, the reverse is true. The value of shale producer’s reserves have fallen more than 25% since 2013, from $18.52 per barrel to$13.60 per barrel at the end of 2014. That figure has likely fallen further in 2015. I recently wrote about how the long-term demand for oil should help rebuild pricing. As a result, companies with near-term liquidity needs, but appealing longer-term fundamentals, could now be cheap enough to attract larger buyers. Consolidation Has Commenced We may already be witnessing asset-rich firms attracting the interest of cash-rich buyers. Read More

Every few months, I like to review the most intriguing open market purchases made by CEOs, CFOs and other key insiders. These folks typically have a clear read on business trends — even better than the rest of us — and their cash commitment should be a catalyst for further research.  These days, I am steering clear of insider buying at energy producers. These insiders have been premature in their hopes for a rebound, and it’s simply too uncertain to know when this sector will get going again. I am, however, intrigued by other energy-related industries, such as the… Read More

Every few months, I like to review the most intriguing open market purchases made by CEOs, CFOs and other key insiders. These folks typically have a clear read on business trends — even better than the rest of us — and their cash commitment should be a catalyst for further research.  These days, I am steering clear of insider buying at energy producers. These insiders have been premature in their hopes for a rebound, and it’s simply too uncertain to know when this sector will get going again. I am, however, intrigued by other energy-related industries, such as the master limited partnerships (MLPs), many of which are more sensitive to volumes than pricing.  Here are three companies with heavy insider buying that recently caught my attention. #-ad_banner-#Kinder Morgan, Inc. (NYSE: KMI) Richard Kinder is seen by many as one of the pioneers of the energy MLP business models. His firm has either built or acquired many pipeline assets over the years, which has enabled Kinder Morgan to be among the steadiest producers of growing dividends. So when Richard Kinder paid $3.95 million to acquire 100,000 shares in mid-March, it was surely noteworthy. According to… Read More

Sitting in front of me on my desk is history’s most popular brand. Every year this centuries-old brand sells $100 billion all around the world from the United States to Europe to India to China. It’s almost certainly the oldest brand known to mankind — with documented occurrences dating back over 6,000 years. And since its inception, the brand has moved an estimated $6.7 trillion worth of product, using today’s prices. The brand I’m talking about is gold. #-ad_banner-#The nugget of gold in front of me on my desk is the size of a quarter. Beside it, I have much… Read More

Sitting in front of me on my desk is history’s most popular brand. Every year this centuries-old brand sells $100 billion all around the world from the United States to Europe to India to China. It’s almost certainly the oldest brand known to mankind — with documented occurrences dating back over 6,000 years. And since its inception, the brand has moved an estimated $6.7 trillion worth of product, using today’s prices. The brand I’m talking about is gold. #-ad_banner-#The nugget of gold in front of me on my desk is the size of a quarter. Beside it, I have much larger pieces of other valuable minerals — copper, zinc and quartz, to name a few. But despite the utility of the latter materials, these samples are worth just a couple of dollars each. My small gold nugget would sell for more than $1,000. Physically and chemically, there’s really no reason for this difference. Certainly gold has some unique properties: it doesn’t tarnish, and it’s also extremely soft and easy to work into new forms. But the same is true of copper. And yet the metal sells for just $3 per pound, or about $45 per troy ounce, while the same… Read More

#-ad_banner-#The commodity slump of the past few years, divergent growth rates between the United States and other developed economies and a sudden glut in crude oil have been dominating the headlines. Yet the major U.S. stock markets indexes continue to toil near all-time highs. It’s not a coincidence. The United States has clearly become a safe port in stormy seas, and many of the world’s leading hedge funds and sovereign wealth funds are selling assets abroad and doubling down on U.S. stocks. As a perhaps unintended side effect, the surging dollar has absolutely decimated a wide range of other currencies. Read More

#-ad_banner-#The commodity slump of the past few years, divergent growth rates between the United States and other developed economies and a sudden glut in crude oil have been dominating the headlines. Yet the major U.S. stock markets indexes continue to toil near all-time highs. It’s not a coincidence. The United States has clearly become a safe port in stormy seas, and many of the world’s leading hedge funds and sovereign wealth funds are selling assets abroad and doubling down on U.S. stocks. As a perhaps unintended side effect, the surging dollar has absolutely decimated a wide range of other currencies. And that spells opportunity as a wide range of global securities can now be had for fire-sale prices, at least in dollar-denominated terms. Too Soon? While the dollar continues to rally, many assume it is wise to let the process play out before starting to pick up assets among the global carnage. Yet we may be closer to the end of the currency shifts than many realize. Right around the time the Fed acts (perhaps in June) “it will be embedded in the dollar” said Jens Nordvig, Nomura’s global head of currency strategy, to… Read More

On March 18, the Federal Reserve gave  its clearest hint yet that interest rate hikes are coming. The Fed will no longer “remain patient,” which suggests that the time for action is near. Against that backdrop,  real estate investment trusts, or REITs, have been punished. In the last month and half the Vanguard REIT Index (NYSE: VNQ) has fallen 3%. #-ad_banner-#Yet is such concern warranted? After all, the yield on the 10-Year Treasury bill just slipped back below 2.0%, even after the Fed shifted its tone. Even if 10-year yields were to rise from the current level to 2.5% or… Read More

On March 18, the Federal Reserve gave  its clearest hint yet that interest rate hikes are coming. The Fed will no longer “remain patient,” which suggests that the time for action is near. Against that backdrop,  real estate investment trusts, or REITs, have been punished. In the last month and half the Vanguard REIT Index (NYSE: VNQ) has fallen 3%. #-ad_banner-#Yet is such concern warranted? After all, the yield on the 10-Year Treasury bill just slipped back below 2.0%, even after the Fed shifted its tone. Even if 10-year yields were to rise from the current level to 2.5% or 3%, investors in search of income will not completely abandon REITs that yield between 4% and 6%. Another way to look at an eventual rebound in rates: it signals a firmer economy, which should be beneficial to real estate firms. In the end, speculation about interest rates is just distracting noise. Your goal should be to add great businesses to your portfolio at opportune prices. Use the volatility in high-yield securities to add long-term winners to your portfolio. HCP, Inc. (NYSE: HCP), Digital Realty Trust, Inc. (NYSE: DLR) and Omega Healthcare Investors, Inc. (NYSE: OHI) are all down 8% or… Read More

Are wage increase announcements bad news for share prices? That’s the easy conclusion to draw after seeing the recent pullback in shares of Wal-Mart Stores, Inc. (NYSE: WMT) following an announcement that the retailer would raise wages for hundreds of thousands of its employees. The starting wage for associates will increase to $9 per hour in April and further to $10 an hour by February of next year. Department managers will also see their starting wages increase to $13 an hour this summer and to $15 an hour next year. #-ad_banner-#The raise will affect as many as 500,000 associates and… Read More

Are wage increase announcements bad news for share prices? That’s the easy conclusion to draw after seeing the recent pullback in shares of Wal-Mart Stores, Inc. (NYSE: WMT) following an announcement that the retailer would raise wages for hundreds of thousands of its employees. The starting wage for associates will increase to $9 per hour in April and further to $10 an hour by February of next year. Department managers will also see their starting wages increase to $13 an hour this summer and to $15 an hour next year. #-ad_banner-#The raise will affect as many as 500,000 associates and could cost the company upward of $1 billion in additional annual wage expenses. Shares have now slid more than 3% since the late February announcement. Investors saw this coming. Back in November, Greg Foran, CEO of Wal-Mart’s U.S. operations, warned the company would see pressures to the bottom-line as it balances wage leverage with higher customer service standards. Though investors see the wage hikes as bad news, the opposite is true. Higher wages should strengthen the company’s competitive position and even boost bottom-line earnings. Much Ado About Nothing First, understand that the impact of the wage increase is likely overstated. Read More

$40? $50? $60? Nobody really knows where the price of oil will stabilize in coming quarters. #-ad_banner-#And the eventual upturn? Supply destruction is taking place right now, which will eventually push oil prices back above $80, but that process may take several years to play out. Against such a backdrop, it’s quite tricky to peg a current fair value for the companies that produce oil and gas. They’ll be solid values when oil starts to rebound, but could also be dead money if oil prices stay in the current range for many quarters to come. One area that does hold… Read More

$40? $50? $60? Nobody really knows where the price of oil will stabilize in coming quarters. #-ad_banner-#And the eventual upturn? Supply destruction is taking place right now, which will eventually push oil prices back above $80, but that process may take several years to play out. Against such a backdrop, it’s quite tricky to peg a current fair value for the companies that produce oil and gas. They’ll be solid values when oil starts to rebound, but could also be dead money if oil prices stay in the current range for many quarters to come. One area that does hold the potential for a solid and rapid rebound is the companies that provide services to the energy producers. The simple reason: some of them are now trading far below tangible book value. If they retain sufficiently strong balance sheets and generate at least break-even cash flow in 2015, then stable energy prices should remove the current panicky atmosphere enough for these stocks to be valued at least in line with their net assets. Here are three energy services providers that look vastly oversold and are starting to attract value investors. McDermott International, Inc. (NYSE:… Read More

  Sometimes good companies get beaten down by short-sighted investors. When that happens, it is good news for savvy investors.   #-ad_banner-#In 2012, Apple, Inc. (NYSE: APPL) fell more than 18% in less than two months following the release of the iPhone 5 and iPad mini, when investors became nervous that the company had reached its creative and competitive peak.   Monsanto Co. (NYSE: MON) sank 44% in the first half of 2010 when its licensing practices were called into question.   International Business Machines Corp. (NYSE: IBM) suffered a near 40% share price drop in late 1992, following its… Read More

  Sometimes good companies get beaten down by short-sighted investors. When that happens, it is good news for savvy investors.   #-ad_banner-#In 2012, Apple, Inc. (NYSE: APPL) fell more than 18% in less than two months following the release of the iPhone 5 and iPad mini, when investors became nervous that the company had reached its creative and competitive peak.   Monsanto Co. (NYSE: MON) sank 44% in the first half of 2010 when its licensing practices were called into question.   International Business Machines Corp. (NYSE: IBM) suffered a near 40% share price drop in late 1992, following its attempt to compete with the newly-popular personal computer.   Now look at where the first two companies are today: After continuing to fall another 25%, Apple has since climbed nearly 60%. Monsanto is back up 158% since its fall in 2010.   In 1993, IBM was in the midst of a downturn even worse than the other two I just mentioned. When Louis Gerstner finally stepped in as CEO in April 1993, the company was posting losses of $8 billion per year.   But, through an intensive corporate restructuring — selling off unprofitable divisions, integrating its strongest service offerings and… Read More

All across the country, many companies held board meetings to review the plans and expectations for the year ahead. More than a few board discussions likely revolved around the disconnect between a brightening outlook and an undervalued share price. Some of those board attendees then picked up the phone to call their broker, making insider purchases that should pay off in the year ahead. #-ad_banner-#To be sure, insiders have been especially active in the energy sector, seeking to take advantage of deep share price pullbacks. Of course these insiders don’t have a crystal ball, and can’t be sure that oil… Read More

All across the country, many companies held board meetings to review the plans and expectations for the year ahead. More than a few board discussions likely revolved around the disconnect between a brightening outlook and an undervalued share price. Some of those board attendees then picked up the phone to call their broker, making insider purchases that should pay off in the year ahead. #-ad_banner-#To be sure, insiders have been especially active in the energy sector, seeking to take advantage of deep share price pullbacks. Of course these insiders don’t have a crystal ball, and can’t be sure that oil prices won’t fall yet further. So it’s best to hold off following the lead of insiders in this group right now. Any area that is always a fertile source of insider action is value stocks. Here are three companies that are either trading below book value, or sporting great dividend yields, that recently caught my eye. (All data supplied by insiderinsights.com) Endurance Specialty Holdings Ltd. (NYSE: ENH)   In mid-December, I noted that this re-insurer was unsuccessful in its efforts to acquire rival Aspen Insurance Holdings (NYSE: AHL). On November 3, when the company held its Q3 conference call,… Read More

When the directors at Aspen Insurance Holdings Ltd. (NYSE: AHL) were asked if they would sell the company to Endurance Specialty Holdings Ltd. (NYSE: ENH) for $3.2 billion, their answer was, “no thanks.” Endurance was making such overtures in early 2014. At the time, Aspen sported tangible book value per share of $50, roughly 10% more than the proposed purchase price. Thanks to ongoing profit gains since then, Aspen’s tangible book value per share raised to $54 a share. If Endurance really wants to buy this insurer, then it needs to hike its buyout offer… Read More

When the directors at Aspen Insurance Holdings Ltd. (NYSE: AHL) were asked if they would sell the company to Endurance Specialty Holdings Ltd. (NYSE: ENH) for $3.2 billion, their answer was, “no thanks.” Endurance was making such overtures in early 2014. At the time, Aspen sported tangible book value per share of $50, roughly 10% more than the proposed purchase price. Thanks to ongoing profit gains since then, Aspen’s tangible book value per share raised to $54 a share. If Endurance really wants to buy this insurer, then it needs to hike its buyout offer another $10, to around $54 a share. Aspen’s board is aware of a simple investing fact, which was often discussed by Graham & Dodd, the patriarchs of value investing. If a business carries more net assets on its books than the current share price reflects, then the business could simply be broken up to fully realize the best price. In fact, as recent mergers and acquisitions trends show in the insurance industry, book value can be seen as a floor not a ceiling. Roughly six weeks ago, Renaissance Holding Ltd. (NYSE: RNR) offered to buy Platinum Underwriters Holdings Ltd. Read More