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Petróleo Brasileiro S.A. - Petrobras Message Board

  • s.eranger@sbcglobal.net s.eranger May 7, 2012 2:45 PM Flag

    What Am I missing?

    Petroleo Brasileiro (PBR) - Buy

    Petroleo Brasileiro (Petro Bras) is one of the largest oil & gas companies in the world. It operates in the exploration and production, supply, gas and energy, and distribution segments. While its operations primarily concentrate on the oil-rich Brazilian fields, Petro Bras also engages in the exploration and production businesses in Americas, Africa, Europe, as well as Asia. Brazilian equities have mostly underperformed global markets this year, and Petro Bras is no exception. The stock lost 4% in this year.

    Click to enlarge(Source: Finviz)

    Founded in 1953, Rio de Janeiro-headquartered Petro Bras has grown into a global energy titan. The company generated profits of $20 billion from revenues of $146 billion in the last twelve months. At a trailing P/E ratio of 7.69, it looks like a cheap deal. The forward P/E ratio is expected to be as low as 7.44. Analysts estimate a modest growth of 3.8% for the next five years. Based on this estimate my FED+ minimum fair value for Petro Bras is $37. Thus, the stock has substantial upside potential. Analysts also agree with me. Their mean target price of $37.5 imply about 50% upside potential.

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    • Cover $19.86. From here to $14 pretty much a grey area…I will flip long scaling down from $14 to $10. I’m done with this trade.

      btw. CC will say "we don't want to talk about gas hikes" hehe.

    • Thanks! I agree that working from the real deal using old wall street journals is the most authentic way to go about it.

      The main reason to do the study is to show that high turnover can be damaging to ones returns. Of course if you are trading for an IRA none of this matters.

      The idea was sparked because of the high returns of Claude Shannon. He compounded at 28% per annum for 30 years with almost no turnover.....better track record than Buffett. Pretty amazing. He did have the vision to pick a few companies that turned out to be huge winners but even the losers in the portfolio did better than the indexes.

    • I'm glad you had no loss. You got lucky on a musky way.

      btw.
      btw. jaque, the link you posted on your model disappeared in this yahoo m board. Anyways, is tough to conciliate the words “random” and “survivor bias” on the same sentence. So I figure that even if it’s a lot of work it’s worth searching every single stock. Get rid of the “survivor bias”. Your finding would be so valuable that I won’t be surprised if you profit from your paper.

      If I come up with something else, I’ll let you know.

    • LOL. What are you missing? Try everything.

      The first paragraph, PBR drills everywhere, is meaningless. That has been going on for years.

      <The forward P/E ratio is expected to be as low as 7.44.>

      And you believe that?

      How do you calculate a forward PE without knowing the value of the Real and/or price of oil?

      I will make it easy on you. You guess what it will be, and that is what you are missing.

      If the Real goes to three to the dollar, and it should, you can kiss that PE goodnight.

      The dollar is so undervalued versus the Real that Brazilians are paying $1000 to fly to Florida and are loading up on every good that they can get their hands on. One in four purchases of Miami real estate is being bought by a Brazilian.

      Does that tell you how overvalued the Real is?

      Meanwhile, Brazil is actively lowering interest rates which means the Real falling is practically a sure thing.

      The usual oil:natural gas pricing ratio has traditionally been around 6:1. Recently, it has gone as high as 60.

      Does that tell you how expensive oil is?

      U.S. oil production is soaring, and demand is falling, and the U.S. is the largest oil market in the world.

      Still, all the oil nuts wants to talk about is China. News flash: the U.S. consumes almost twice as much oil as China does. We are still kind of important when it comes to the world's oil markets.

      Do you know the U.S. is producing 10 year highs in oil and consumption has fallen to 10 year lows?

      The whole peak oil and inelastic demand lines used to justify higher oil prices have proven to be pure b.s. Got it? They are myths.

      If oil were correctly priced via the oil:NG ratio pricing mechanism, it would be $15 a barrel. Even at that price, Middle Eastern Nations would still be able to produce oil at a profit.

      • 5 Replies to docjoe999
      • Nat gas to oil ration are meaningless since one is a worldwide commodity and one is local. Which price are you describing? The one in the US at $2.30 or the one in Asia at about $7?

        If the future exchange rates were as certain as you say, well, the real would be there already. That's how the markets work, they eliminate risk free arbitrage. There are pretty valid argument that the dollar will go up or down.

        You create P/E based on assumptions. You doubt a forward P/E of 7 that is based on the consensus of people paid to do this, but your implied P/E of much higher than 7 seems to have no doubt.

        It is all about P/E. The stock is down because of goverment interference risk, drilling risk, and clearly earnings risk. The entire value of any company is discounted future earnings.

        BTW, the 'correct' price of oil just happens to be what the market says it is. Anything else is not 'correct' it is a contrary opinion.

      • but but but yahoo says the forward PE is 6... Do you understand how much oil is in those Tupai fields???

        These people shouldn't even be at the same table as you doc. If they could understand who they are trading against they'd probably quit. Buffet was on TV yesterday saying he'd love to trade against a bunch of psychotic drunks. When I look at the back and forth here that's what I feel it's like.

      • s.eranger@sbcglobal.net s.eranger May 8, 2012 2:22 PM Flag

        Thanks..I wasn't trying to insult you or be condescending.

        This obviously has major issues which my "adviser" doesn't understand. Wouldn't be the first time.

      • Also, there’s the inflation side, they are losing money selling at $7 gal. No way these guys hike gas prices under a faster inflation environment.

        “Yields on Brazilian interest-rate futures advanced from a record low as faster inflation overshadowed last week’s savings account changes to facilitate further cuts in borrowing costs.”

        http://www.bloomberg.com/news/2012-05-08/brazil-rate-futures-yields-rise-as-index-shows-faster-inflation.html

      • Nobody talks about the massive cost overruns at the Pernambuco and Rio refinaries. A 7 billion dollar project quickly over a few years grows to over 21 billion. Brazil is a corrupt country and these cost overruns are now showing up at the national content shipyards where people laugh at the hoped for completion date at all projects.
        Jim Chanos calls PBR a way for the Brazilian Gov to get foreign money to pay for a risky build out.
        Graca Foster is an old time PT member. She like the national content rules which screw Petrobras. Imagine a socialist in charge of Exxon diong thing to favor the workers, not protecting the shareholders.
        Gas costs about 7 bucks a gallon in Brazil due to high taxes PBR is losing money as it pumps gas.
        PBR production down 5% in latest quarter. Whith Real falling, they will have trouble paying the interest on the massive debt.
        Brazilians with money are buying property abroad with overvalued Real not shares of PBR.
        Local press in Brazil calls the books of PBR "difficult to understand." So the numbers are dubious.
        The judiciary is dangerous, forced Chevron to cap a well that was not in deep water that was producing 60,000 barrils a day due to a miniscule seep. Exxon has left pre-sal Brazil. Chevron execs face jail time.
        I agree with doc that the trend continues downward here.

    • Uuummmm.... do we really need to go over this again ?
      Have you followed this MB at all ?

      Stop listening to you anal-ist... and start listening to docjoe. He'll set ya straight on PBR.... lol

 
PBR
7.17+0.020(+0.28%)May 3 4:01 PMEDT