I don't really disagree with anything you said, except that I'm a fan of the life sciences VC direction. I work in the life sciences and there are some new diagnostic technologies based on big data, proteomics and genome sequencing that I believe will create several billionaires over the next decade. So I like the space overall, *assuming* the experts they have know what they are doing. That's of course always the risk...but I currently have no other way that I know of to get any skin in that game, so I like having a little slice of exposure here.
You completely echo my thoughts with regard to the oil patch. It's a disappointment that they are content to stay on the sidelines. But at least Gross knows his limitations and isn't going off into an area where they don't know what they are doing.
Wow you think we'll see mid 16s?
Here's how I look at it: I've also not been adding high-yield bonds to my portfolio this year. In fact I sold 1/4th of my VWEHX in Q4 2014.
So it's a little hard for me personally to blame Gross and team for not going nuts originating a bunch of stuff. There is too much easy money floating around out there to get good returns on debt with reasonable covenants. But I like the story they have with life sciences VC and the Pimco unitranche deal . I think these are areas where they get some business done. I also like the jet liner leasing space (own some equity in those companies already) and he said they are increasing their activity in this sector. Hopefully that continues as well. We'll see!
On the downside, he said they will NOT get involved in the oil/energy space, since they don't have the expertise in the commodities area. That seems like a shame because I think there have been and will continue to be some good opportunities in this area.
MIssed this summary before I responded to your other post.
I'll just add to your notes here that he did in fact say on the CC that they have already originated a good amount of debt in the current quarter. They also warned that Q1 would be light, as it's historically a quiet quarter for the BDC business. I expect Q2 to be a different story. I think the drop is a great opportunity to add, and I have been doing so.
Sentiment: Strong Buy
He told everybody on the CC that they have already originated a large book of business in the current quarter. He also said they would earn the dividend this year. When an analyst asked if he meant for "the rest of the year" or if he meant they would additionally make up for the deficit we had in Q1, he answered that the full year dividend including Q1 would be earned.
Now, each person needs to decide whether to believe him or not. I think they have a good story with a lot of opportunity in front of them, so I'm buying.
Sentiment: Strong Buy
Congrats for not digging your heels in on the short side (like I did on the long side - I'm still slightly under breakeven right now). Best of luck.
I am suspicious that BBEP was the victim of naked shorting, and a failure to deliver perhaps millions of synthetically created shares, combined with the rise in oil prices has triggered a massive squeeze. The action we have endured (the dramatic downswing but ALSO the recent dramatic upswing) goes beyond fundamentals. We've really had no substantive news from the company that would trigger such a move in either direction. To me this is indicative of something very broken within the technical aspect of how this security trades.
This is looking pretty squeezy. The question is whether or not there are any fundamentals behind it, or if this move is entirely technical.
It acts like maybe they are about to get some financing and the banksters know about it. Fingers crossed.
Everybody on every upstream message board is clamoring about how good the hedges look for their favorite company. Well, the collective hedge portfolios of oil producers - the thing that should save them from low prices - in this case turns out to be the *cause* of low prices.
Every energy CEO I see on TV says that in spite of low oil prices, they will pump more oil this year than they did last year. Why is that? It's because their hedged production for 2015 is bigger than 2014's production, and no company is going to stop pumping oil that they've already sold in the futures market at 2x the current spot price. They need the cash! But that only serves to increase the market's oversupply, further driving down the spot price. It's a vicious circle.
Congrats. I thought you were really pushing your luck back at what, $7-8. Well the joke is on me. Whatever you do, don't stay too long and give back your gain. They call it a "short" for a reason.
Not at this time. The 8.3-cent monthly dividend should be safe through March or April. At that time the banks that hold their credit line will evaluate BBEP and could force them to suspend it until they pay down the loan.
Agreed it's ridiculous as the whole thing hinges on their qualification, "if oil prices do not recover." I translate that to "We have no idea what will happen, but we have to say something to look smart to our clients."
The answer to this question lies in how much the cost of drilling is impacted by the oil price. At a low price, the marginal plays (fields that have high cost to produce oil) are simply not economical and no amount of drilling can fix that. Drilling activity will stop in these areas, increasing rig supply, thus decreasing drilling costs. If the cost to drill falls enough, then yes, companies could just drill more in the areas where oil is cheaper to bring to the surface and where wells have a lower rate of decline. But then you have an industry that is pumping more, lower-margin oil and that just keeps pressure on price. So be careful what you wish for.
What we want to see is the lower price of oil stimulate demand. That, plus the lower supply in marginal plays can hopefully reverse the price trend over the next months.