Wednesday, August 17, 2016

Out of the Money Puts?

Ridiculously overpriced garbage that might be worth owning puts on:

13 comments:

CP said...

XOM had net income of $1.8 billion in the first quarter. The upstream lost a little bit of money, but downstream and chemical made money.

If you value those two segments at 15x Q1 annualized net income, they're worth $135 billion. (That would be in the top few dozen of the S&P 500.)

The enterprise value of XOM is $400 billion, so you're paying $265 billion for the oil and gas reserves.

The PV-10 was $208 billion at the end of 2014, down to $71 billion at the end of 2015.

CP said...

A Never, Never is a public firm that will never, ever make profitability its first priority and will never, ever willingly deliver a penny of cash back to shareholders. It will never pay a dividend; it may never buy back stock. Shareholders may make a buck reselling to greater fools. That will be no thanks to management, who will not even give the appearance of trying to manage to shareholder value.

http://www.advisorperspectives.com/commentaries/whitebox_051514.php?channel=Practice%20Management

Christopher Calvert said...

Don't forget about AMZN!

CP said...

I think the bullish thesis - [Amazon is] unprofitable because of growth investments - is probably right. The problem is, there's a way for that thesis to be right and for bulls to still lose. What happens if the future of discretionary purchasing - and that's all Amazon is for - isn't that bright? What if American consumers find a lower level of confidence that better fits their reduced future circumstances, and they tighten their belts?

Then the flywheel would essentially run backwards; the huge fixed costs of the capex investments working against you.


http://www.creditbubblestocks.com/2014/09/review-of-everything-store-jeff-bezos.html

PD said...

interesting thought CP.
What's the thought on TLT?

PD said...

nevermind i clicked on TLT...

CP said...

On the first day of 2012 the ExxonMobil shares closed the day at $85.12 – this was the environment of $100 - $120/barrel oil, and the most robust earnings period for oil companies in decades. Would anyone care to guess ExxonMobil’s share price as of June 8, 2016 - $90.78. That’s right, despite a 60% decline in earnings, ExxonMobil actually traded at a higher share price, by 7.1%, than in the beginning of 2012. It’s as if investors believe ExxonMobil is not even an oil company, or at a minimum that the company’s earnings are immune to variations in oil prices, which clearly they are not.

http://horizonkinetics.com/docs/Exxon%20Conundrum_July%2016_FINAL.pdf

Anonymous said...

Don't the Horizon guys blame XOM's share price on the inflows into index funds?

CP said...

Sure, read that whole piece.

bjdubbs said...

Isn't XOM basically a bond substitute, with some inflation protection? It's seems to be valued more like a toothpaste stock than an oil stock. It's so well run that it's basically in a category of its own. CVX is the one that's really out of whack with reality.

Anonymous said...

FB captures something like 25% of of all time spent on mobile phones. FCF is large and rapidly growing. Not sure why it is garbage.

League of Women Voters said...

Obviously people who read this blog are long term bearish on the purchasing power of people who spend time on their mobile phones looking at Facebook.

Hillary wants to drive their incomes down to the levels of the Chinese, and since they're fat and stupid they're going to vote for her.

You're the type of person who sees the Petri dish is filling up with bacteria, extrapolates the trend, and says that in a decade the bacteria will fill the entire universe.

CP said...

https://glennchan.wordpress.com/2016/08/31/exxon-mobil-put-options/

"I think that valuing Exxon at $129B is being generous. However, I think that it is highly unlikely that Exxon will go bankrupt given low amounts of debt and good assets in downstream, chemical, and existing upstream assets. The company should have ample coverage of its debt. It’s overvalued but not outrageously so."