Newsletter writer Keith Schaefer of the acclaimed Oil and Gas Investments Bulletin stopped by this morning at CEO Chat, the investment conference in your pocket.
And the questions – and Keith’s answers – came fast and furious: upstream, downstream and everything in between.
Keith is offering CEO.CA subscribers a one-month test drive of his solid newsletter for just $5 (regular $50/mo) – check out that special offer here.
Keith counselled caution and patience as oil equities have not dropped recently even though the price of oil has hit US$40 a barrel again. He said the only producer stocks he really likes are Parex ($PXT-TSX) and Granite Oil ($GXO-TSX). He threw out Canamax ($CAC-TSXV) as his favourite Cheapie-With-A-Chance. But he said the small stocks will be the last ones to go up when the turn in oil comes — and that could be awhile. On the supply side, U.S. oil production has increased for 4 weeks in a row even though rig counts are down.
He invests in the companies he recommends, so his picks aren’t a theoretical exercise. He’s moving his money “downstream” to the refiners, who profit from cheap oil, and avoiding trying to pick a bottom with producers. That’s a mug’s game, unless you’re a day trader.
Counterintuitively, Keith likes expensive stocks: they stay expensive because they’re run by quality management teams with good properties, and “they use that premium valuation wisely to acquire good assets and stay ahead of competition.”
He said generally you get one stock a year fall out of the expensive category and one stock a year succeed spectacularly and come out of the cheap category over to expensive.
Flexibility is key when different investing themes emerge in the energy space each year, he said. Last year it was ethanol and this year it’s the refiners and energy retailers. Loved this line: “The other thing is I shoot my dogs fast.”
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There’s good conversation and some great fundamental analysis every day at CEO Chat, the investment conference in your pocket. Check it out!