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Penn West Petroleum Ltd. Message Board

  • dimasatuman dimasatuman Mar 5, 2009 3:51 PM Flag

    The Dumbest Investment I've Ever Seen

    By Ilan Moscovitz
    March 5, 2009 | Comments (0)

    1. Limit your risk.

    2. Maximize your upside.


    What does Pabrai like today?
    Environments like this one are ripe for Pabrai's strategy, since the market is full of stocks that Wall Street won't touch -- because it confuses uncertainty with risk.

    As Pabrai recently told my Foolish colleague Morgan Housel, "Because of all the recent turmoil we've seen, there are some incredible opportunities outside the financial-services space. Right now, that's really the place to make some hay!"

    Specifically, he's looking for companies trading at a discount to their book values and to their future cash flows. Who fits those criteria right now? I ran a quick screen to find out.

    Each of these companies is highly profitable, became more profitable this year, and is trading at a significant discount to its book value:

    Company
    Price-to-Book Value
    Return on Capital
    Return on Capital Improvement
    Industry

    NRG Energy
    0.7
    10%
    3%
    Utilities

    Penn West Energy Trust (NYSE: PWE)
    0.4
    12%
    9%
    Oil and gas exploration

    U.S. Steel (NYSE: X)
    0.4
    21%
    10%
    Steel

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    • Compare the current price of PWE to its price when oil hit $35. If the price was right then, there's no reason for this fire sale, when oil is over $43, and future contracts have the price above %50.
      There's too much noise regarding the failed companies. For all I care, let the government run them, and let the stock holders lose what's left of their money. Those auto and financial instiyutes can not run any worse if taken by the government.
      I don't see government trying to pour cash into PWE, to help its share holders.

    • Isn't investor sentiment an amazing thing? Many O&G companies are now trading at what amounts to fire-sale prices.

      Companies that have real assets, in the form of reserves, and will remain profitable. Seems to be a great time to be nibbling your way back into some of these cos.

 
PWE
0.7845+0.0119(+1.54%)Feb 5 4:02 PMEST