Tuesday, March 11, 2014 4:18 PM
One of the best ways to identify sectors that are undervalued, with huge rebound potential over the next few years, is to track the activities of private equity firms.
These investment funds tend to be long-term holders of companies and assets that are purchased when the sector is out of favor or financially troubled. Their focus on valuation and long holding periods are among the chief reasons that private equity and buyout funds have consistently been among the top performing investments over the past three decades.
Right now, private equity funds are becoming very interested in the energy sector. Kohlberg Kravis Roberts (NYSE:KKR) just closed a $2 billion fund to invest in North American energy companies. Preqin research firm, PE funds focusing on energy raised over $27 billion last year. Ernst and Young, 77 percent of executives surveyed said they expect to see increased private equity interest in North American oil and gas deals.
Carlyle Group (NASDAQ:CG) recently spoke at the SuperReturn PE conference in Berlin -- and identified energy as one his firms preferred areas for new investment. "I think carbon-related energy is a great opportunity," he told investors, "because of what is going on in the United States, the energy revolution and the enormous demand for energy in the emerging markets.”
One stock that may not show up on investors' screens is EXCO Resources (NYSE:XCO). The company is not on most lists. The company had approximately 70,000 net acres in the Haynesville and Bossier sha