Category Archives: Commodities

A Look At The Investment Opportunity In California Resources Corporation Across Its Capital Structure


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The last few months have been exceptionally hectic, and I have not been able to publish anything here for my readers as regular as I would like. I will try in the near future to write something about China, whose situation has not changed at all over the last year – actually, if you have been following our analysis on China over the last couple of years, you would arrive to the conclusion that the situation has actually worsened, given higher leverage levels.

But in the meantime, I have just published an article in Seeking Alpha about the investment opportunity in California Resources Corporation (CRC:US), an oil&gas company whose assets are in California. Because of a new reading policy in Seeking Alpha, the article will be available for free during the next couple of weeks and after that it will be protected behind a firewall. Overall, and given my bullish outlook for oil prices for the next 12 months (which I discussed here and that it is of course very bad news for the health of the global economy), the investment opportunity in CRC looks very attractive, both in equity and (2nd lien) bonds.

The article can be read here.

The new darlings of Wall Street: The folly of oil fracking investing


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[Acknowledgment: Thanks to Edward Worsdell for helpful comments on an earlier draft of this post.]

In a recent post we took a deep dive into the debate over whether the US stock market is expensive or not. We concluded that i) the market is indeed quite expensive, ii) the market is not in a ‘bubble’ territory, but rather higher equity valuations on average should be considered the new normal (on the proviso that this new normal state of affairs should not be used to justify current equity valuations), and iii) historical standards can be a deceptive guide in predicting future equity returns and should be used with caution.

However, the market, taken as a whole, has a wide range of investment opportunities. We can find situations where a sector is cheap for a particular reason (e.g. the US retail sector) or situations where a company is trading at mind-blowing multiples because the market is discounting unrealistic expectations about future growth prospects, as in the case of Tesla, with a market capitalisation now higher than well established competitors like Ford or General Motors.

But this post is not about the fate of investors in a single company like Tesla or whether this is an attractive investment or not (we think it is not). Rather, this post will zero in on a sector that has been gaining increasing media attention, a sector that is considered to be the new pride of American industry, one that is highly leveraged and in which Wall Street investment banks have so much at stake in it. Continue reading