What Makes Kosmos Energy (KOS) an Acquisition Target?
Patient Capital Management, a value investing firm, released its “Patient Capital Opportunity Equity Strategy” third quarter 2023 investor letter. A copy of the same can be downloaded here. During the quarter the strategy returned -6.0% net of fees compared to the S&P 500’s -3.3% return. As the quarter demonstrated, the markets are uncertain. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Patient Capital Management highlighted stocks like Kosmos Energy Ltd. (NYSE:KOS) in the third quarter 2023 investor letter. Headquartered in Dallas, Texas, Kosmos Energy Ltd. (NYSE:KOS) explores and produces of oil and gas properties along the Atlantic Margins. On November 1, 2023, Kosmos Energy Ltd. (NYSE:KOS) stock closed at $7.30 per share. One-month return of Kosmos Energy Ltd. (NYSE:KOS) was 2.96%, and its shares gained 10.77% of their value over the last 52 weeks. Kosmos Energy Ltd. (NYSE:KOS) has a market capitalization of $3.359 billion.
Patient Capital Management made the following comment about Kosmos Energy Ltd. (NYSE:KOS) in its Q3 2023 investor letter:
"We added to our energy exposure in the quarter, buying shares in Kosmos Energy Ltd. (NYSE:KOS), an exploration and production services company with assets in Africa. The company is differentiated in the exploration & production (E&P) space because of its growth profile (+30% YoY in 2024), long reserve life (>20yrs, nearly double the sector average) and focus on liquified natural gas (LNG). We see this as a classic case of time arbitrage where the market is myopically focused on the near-term risk the company will miss production targets for new assets while ignoring the long-term intrinsic value. After years of investing in project development, it is close to moving into the harvesting phase with production expected to grow 30% YoY in 2024. At the same time, capital expenditures should fall 30% YoY leading to very strong FCF yield of >25%, which will initially go towards debt paydown. At these levels, the company will generate more than its current market cap in FCF over the next 5 years at $90 Brent prices. With the combination of gas-heavy reserves and inflecting cash flow generation, we think Kosmos is significantly undervalued and a potential acquisition target."
A drilling rig pumping oil and gas from a well in Latin America.
Kosmos Energy Ltd. (NYSE:KOS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held Kosmos Energy Ltd. (NYSE:KOS) at the end of second quarter which was 28 in the previous quarter.
We discussed Kosmos Energy Ltd. (NYSE:KOS) in another article and shared the list of best African stocks to invest in. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
