The Capital Asset Pricing Model (CAPM) is a widely accepted theoretical framework for valuing securities. An important feature is the Efficient Frontier. This reflects the concept that, although there’s an almost infinite number of portfolios that an investor can hold (think of all the individual stocks and bonds out there), a small number of these […]
Last week’s article by Jason Zweig (see Think Before You Fish for Bargains in Chinese Stocks) caught my eye, because it warns against investing in Chinese stocks with the expectation of high GDP growth driving high equity returns. A major reason investors allocate to emerging economies is because they expect that relationship to reward them, […]
A common concern of both existing and potential investors in energy infrastructure is the relatively high volatility of recent years. Many recall the “toll-model” of pipelines that was the basis of their appeal prior to 2014. As we have often written, the Shale Revolution broke the MLP model, as companies with very high payout ratios […]
You might think that using a crane to place steel boxes so as to block all the entrances to a global energy corporation might attract some attention before completed. Nonetheless, Greenpeace successfully demonstrated a gap in business continuity planning, just hours before BP’s annual general meeting. Even at 3am, BP’s global headquarters should have had […]
New pipelines are becoming harder to build. New York recently blocked a natural gas pipeline planned by Williams Companies (WMB) because of environmental concerns, although WMB plans to reapply. Canada is becoming a more difficult and expensive place in which to build (other than in oil-rich Alberta). Enbridge (ENB) went as […]
Cher wanted to turn back time to regain love lost. But economists are always turning back time to adjust prices for inflation, to calculate a measure in today’s dollars. This is to provide a relative price, comparable to current purchases. Although mathematically correct, applied over decades or more it produces a misleading picture of what […]
If Energy Transfer (ET) was a private company contemplating an IPO, the 15% Distributable Cash Flow (DCF) yield indicated by their underwriters would draw laughter. The bankers would be ushered out of the conference room. Yet that is the lowly valuation investors assign to perhaps the least loved pipeline company in a sector that investors […]
Warren Buffett likes the Permian Basin. This was clear from Berkshire’s (BRK) proposed $10BN preferred investment in Occidental (OXY) should they buy Anadarko (APC). Berkshire’s annual shareholder meeting was followed as usual with a Becky Quick interview on CNBC. The 8% dividend on the preferred OXY will issue to finance their acquisition could be inducement […]
We’re in the middle of earnings season, and last week several companies provided 1Q reports. The energy sector continues to struggle to excite investors. Although pipelines stocks delivered very strong performance through March, in recent weeks investors have started to question the rally’s resilience. As a result, sentiment could use a boost from strong earnings. […]
